KPMG’s 2013 Fiduciary Management UK Market Survey published today highlights that the UK Fiduciary Management full delegation market continues to grow at over 20 percent per annum, and increasingly appeals to smaller schemes.
The survey provides a comprehensive study of the UK full delegation FM market, which currently comprises £28.7bn of UK pension scheme assets across 211 UK pension scheme mandates and equates to approximately 2.6% of the UK total. Alongside this there remains a large ‘partial delegation’ FM market which covers an additional £30bn of AUM across 135 mandates.
Calum Brunton Smith, Head of Fiduciary Manager Research at KPMG Investment Advisory comments: “The market continues to grow at a remarkable pace. Despite growth slowing in terms of AUM, we continue to see a consistent growth in numbers of mandates – highlighting the increased interest from smaller schemes, with 91% of the market now made-up by mandates less than £250m in size. Mandates in excess of £1bn remain rare.
“We continue to see implemented consultants hold the lion’s share of the market, but specialist providers and asset managers have been gaining over the last year. Overall FM accounts for 2.8% of estimated total UK defined benefit pension scheme assets. AUM growth has been exceeding 20% p.a., although is slightly lower than the previous year’s rate. This is consistent with our expectation that FM will continue to grow over the medium term, albeit at a more normal growth rate.”
The number of trustees engaged in FM that appoint an advisor or in-house expertise to independently monitor their fiduciary provider has increased to 53% from 30% in 2012 - reflecting greater awareness among trustees of the benefits of independent oversight.
The experience of UK FM providers overseas paints a very different picture to that of the UK, with investment managers holding the majority of mandates (65%). In terms of assets, investment managers hold 47% of the overseas AUM managed by UK FM providers, with specialist providers holding another 32%.
Alex Koriath, Head of Research at KPMG Investment Advisory, said:“With a market that is becoming more mature whilst still growing rapidly, we see a greater focus on governance and best practice. More mandates are awarded through competitive tender exercises, greater use of independent monitoring and more demands for transparency are all encouraging signs.
We are seeing almost all fiduciary managers now being open and transparent about AUM and client numbers. Evaluation of performance is the next big challenge and we are inviting pension schemes to participate in our independent online survey to help shed light on the question as to whether FM adds value.”
We are intrigued by the market dynamics and see FM entering a more mature growth phase that should attract new providers to the market.”
Notes for editors:
*Based on data released in the 2013 Purple Book
Fiduciary Management (“FM” also known in the UK as "Implemented Consulting“, “Delegated Consulting” or "Solvency Management") is a relatively new approach to managing assets of UK defined benefit pension schemes.
FM is a broad concept with no single definition but usually involves the delegation of some investment decision making previously owned by the Trustees to a fiduciary manager (the “provider”) with the aim to allow decisions to be taken and implemented more quickly with clear accountability. Fiduciary managers aim to add value through strategic asset allocation, tactical allocation changes and the selection of active fund managers.
In our KPMG survey we distinguish between the ‘full delegation’ approach, whereby a FM manager provides full services across the full assets of a scheme, and the ‘partial delegation’ approach where only a subset of the Scheme assets are delegated and the Trustees retain the remaining responsibilities.
The proportion of UK pension fund assets under FM is still relatively small but continues to grow, with a number of small to medium sized schemes having moved to this approach.
KPMG does not offer any fiduciary management services but is one of the leading independent advisors on FM.
To access the survey, click here
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This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.