Roundtable

Fiduciary management

Improving the oversight of delegated investment Fiduciary management (FM) continues to gather steam in the UK, now accounting for £123bn of scheme assets under management across 719 mandates – 459 full and 260 partial. In the past six months, the pension schemes of McDonald’s, electrical engineering firm Sevcon and the University of St Andrews have […]

April 2017

Improving the oversight of delegated investment

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Fiduciary management (FM) continues to gather steam in the UK, now accounting for £123bn of scheme assets under management across 719 mandates – 459 full and 260 partial. In the past six months, the pension schemes of McDonald’s, electrical engineering firm Sevcon and the University of St Andrews have passed investment decisionmaking to fiduciary managers, all citing governance reasons for the decision. FM growth continues apace, but the number of schemes going out to the full market when tendering mandates remains low. In fact, according to KPMG, only 33% of new appointments in 2016 were advised by a third-party, up from just 23% in 2015. The percentage of schemes using an independent provider to monitor their FM mandate was even lower, at just 13%. Fiduciary management has long struggled to rid itself of the conflicts of interest charges levied against it. It’s true that investment consultants are traditionally advisers, not money managers, yet they account for the vast majority of fully-delegated FM mandates in the UK (339 in 2016, compared with 74 run by specialists and 46 by investment managers). The ‘flipping’ of a traditional consulting relationship into a fiduciary one is understandable from both parties’ perspective. However, it should only really be acceptable if the scheme has undertaken full due diligence when selecting its provider. Ongoing monitoring of the performance of these mandates is a trickier task, given each mandate is bespoke to each scheme’s needs. Third-party monitoring is likely to increase as schemes realise they are not adequately equipped to gauge whether their fiduciary manager is delivering the goods. The industry standard currently being put together should help schemes gain a better understanding of performance as well as improve transparency. This roundtable sees an expert panel of fiduciary managers, advisers, and independent trustees debate the issues around fiduciary management, including why it is appealing, how to compare performance and addressing conflicts of interest.

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