Clear performance measure needed for fiduciary management – Russell
Trustees in the UK need a clearer and more objective way to measure fiduciary management performance if they are to gain confidence in the investment approach, according to Russell Investments.
In a survey it conducted among 95 UK trustees about their experience of fiduciary management, the firm found trustees were using a range of different performance measurements to assess how well their fiduciary managers were performing.
These included their scheme’s funding level and its performance in relation to the legacy portfolio, as well as absolute returns and the performance of individual mandates relative to asset class benchmarks, Russell Investments said.
Shamindra Perera, the firm’s head of UK institutional, said: “Fiduciary management today lacks the objective metrics trustees need.
“Without clearer industry standards and more transparency from providers on performance, it is hugely challenging for trustees to evaluate services and feel confident they have made the right decision for their scheme.”
In the survey, six out of 10 trustees who had implemented fiduciary management said performance was the most important consideration when they selected the managers, and 79% said performance was the most important factor when reviewing their services.
Russell Investments also looked at why some trustees did not use fiduciary managers.
The poll showed that 44% of trustees who had considered but rejected fiduciary management did so out of concern they would lose too much control, with 44% specifically afraid of losing touch with the investment decision-making process.
On the other hand, 68% of those who adopted fiduciary management did so to be able to spend time on investment issues more efficiently, the firm said.
Some 54% believed it would allow them to pursue a more ambitious investment strategy, according to the survey.