The assets under management (AUM) in UK fiduciary management mandates smashed through the £100bn barrier in 2015, according to research.
KPMG’s latest fiduciary management survey found the total AUM in delegated investment strategies increased to £114bn throughout 2015.
The research found £54bn of the total AUM was in fully-delegated mandates, a growth of 42% on 2014, with two-thirds of new mandates coming from schemes under £100m.
But the biggest growth was in partially-delegated mandates which increased 79% throughout the year, driven, KPMG said, by very large schemes engaging a provider to run a part of their portfolio.
Investment consultants continue to dominate the share of mandates with 284 of the total, up from 242 in 2014. This compares to specialist fiduciary management providers with 61 (51 in 2014) and investment managers with 37, up from 10 in 2014.
KPMG head of fiduciary management research, investment advisory Anthony Webb said the number of investment manager mandates were “flattered on the increase” because between 2014 and 2015 a number of jointly-run mandates were reclassified as investment manager clients from consultant clients by the two companies involved.
Elsewhere, only 23% of new appointments were advised by an independent third party and just 13% of schemes use an independent provider to monitor their mandate – a 2% increase from 2014.
Webb said: “We believe the number of new appointments that were advised by an independent third party is relatively low, at 23%. Fiduciary management can be a great service for trustees and seeking advice on the right services and the right terms is an important part of delivering better outcomes for pension schemes.
“The number of schemes using an independent provider to monitor their FM mandate saw a small increase, rising from 11% in 2014 to 13% in 2015. Again, we would argue that it is advisable to seek a second ‘oversight’ opinion, in order to reduce the potential for conflicts of interest.”
Last month the Financial Conduct Authority (FCA) announced it would be investigating the role of investment consultants providing fiduciary services.
Commenting on the lack of competition evident in the tendering process, SEI managing director Patrick Disney said: “Last year’s KPMG survey focused on the lack of competition in the tendering process for fiduciary management. Although this statistic is not repeated in the 2015 survey, by reviewing the statistics on the number of fiduciary management deals awarded in 2015 versus those that were in the public domain as open tender processes, it is clear that this trend still exists. This trend holds particular significance given the FCA’s impending review of asset management which is likely to place investment consultants under further scrutiny.”
Elsewhere, a study by Hymans Robertson has found nine out of 10 independent trustees believe independent consultants deliver advice better aligned to scheme interests than fiduciary managers – and 59% believe fiduciary management is more expensive.
The survey of 23 leading professional trustees with responsibility for more than 100 UK defined benefit (DB) schemes, found almost a third believe fiduciary management costs 50% more, a quarter 1-2 times more and 6% believe it costs 2-3 times as much as independent advice.
Hymans Robertson partner Calum Cooper said: “On the surface, delegation may appear to reduce trustees’ workload but it also means an extra layer of scrutiny is required to monitor the fiduciary manager. To put it another way, delegating doesn’t remove work and risk; it simply changes its nature. Those with fiduciary managers in place often appoint other investment consultants to oversee their activities.”
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