The use of fiduciary management services has increased significantly, with assets under management increasing by 65 percent in the last year to surpass £100 billion for the first time, according to a survey by KPMG.
In 2015, assets under fiduciary management reached £114 billion, compared to £72 billion in 2014. This represents and steep incline compared to a previously steady increase; assets under management totalled £59 billion in 2013, £54 billion in 2012, and £45 billion in 2011.
Of the total assets under management in 2015, full delegation mandates account for £54 billion, while partial delegation mandates accounted for £61 million. This represents a 42 percent increase in full mandates, which accounted for £38 billion in 2014.
The increase in partial delegation mandates was more significant however, jumping by 79 percent from £34 billion in 2014. KPMG attributed this to a trend of larger schemes appointing a fiduciary provider to manage part of their portfolios.
Typically, full-delegation fiduciary management mandates are for amounts less than £100 million, with these relatively low-value mandates accounting for 68 percent in 2014 and 66 percent in 2015.
The percentage of higher-value mandates have remained relatively stable, with those worth £100 million to £250 million accounting for 21 percent in 2014, and 22 percent in 2015.
The survey also showed that the market size has increased significantly, with 620 schemes now using fiduciary management, compared to 508 in 2014. Of new appointments, it also found that 23 percent were advised by an independent third party, while of the total schemes, 13 percent used an independent provider to monitor their mandate.
Anthony Webb, head of fiduciary management research and investment advisory at KPMG, said in the report: “Challenges remain for the market: measuring performance continues to be difficult for trustees, and concerns around fiduciary manager independence remain. However with approximately one in ten UK-defined benefit pension schemes now using some form of fiduciary manager it is clear that it is no fad but an important part of the future.”
In a statement, Webb also commented: “The FM market has grown more than even the most optimistic fiduciary manager expected when we surveyed them back in 2011. To put the £114 billion figure into perspective, UK fiduciary managers collectively now have enough money to buy every single bond issued by the Irish Government.”
He added: “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 KPMG Fiduciary Management Market Survey report was based on results from 13 established fiduciary managers operating in the UK.
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