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BlackRock has been active in fiduciary management since 2005, when it purchased the internal asset management operation of the Philips pension fund in the Netherlands and was awarded a fiduciary mandate to manage the assets.

Since the early days of fiduciary management in the Netherlands, the term has now gained recognition in Germany and the UK, both among providers as a catch-all term for different approaches, and among pension funds. But BlackRock now believes that ‘outsourcing' is preferable to fiduciary management.

Outsourcing is the term that firms like SEI and Russell have been using in the United States for a couple of decades to describe a service similar to fiduciary management in Europe, usually to small pension funds, and based on pooled funds.

"We have a fiduciary duty to everybody, even if we are managing 5% of their assets in global equities," says Andrew Dyson, managing director, global head of institutional business at BlackRock.

"A fiduciary mandate is fundamentally about two things," Dyson continues. "Firstly providing good strategic input to the client so they can set the best possible strategy and secondly about outsourcing the execution of that strategy to someone who is accountable for it, which has been a real Achilles heel for the industry in the past."

But after adding the multinational Henkel, based in Germany, to its small roster of fiduciary clients, and a standalone UK mandate in June this year, Dyson says BlackRock won't go hell for leather in the area of fiduciary management, and expects to get a limited number of small clients.

"We have strong views that in some form or another in the UK, fiduciary will take off. In some cases that is starting out as implemented consulting but in aggregate we don't think that will be a big volume and we see no reason to change that view."

Unlike other fiduciary managers, such as Goldman Sachs Asset Management, BlackRock expects to manage a part of the assets itself and to outsource some to external managers. Clients can expect to benefit in fee terms from this arrangement, but the model does deviate from the one originally developed in the Netherlands by Anton van Nunen.

But the proof of the pudding is in the eating, of course, and pension funds are perfectly capable of deciding on their own how to deal with potential or actual conflicts of interest. What is less clear is how fiduciary management will stack up alongside the consultant driven version of outsourcing, which they term implemented consulting.

Consultants have been very keen to emphasise the distinction between the two. But for Dyson, fiduciary management and implemented consulting are one service - outsourcing.

Dyson also sees potential in different countries for fiduciary outsourcing. Some have already pointed out the similarities between the Japanese model of trust banks, and the fiduciary model, and Dyson acknowledges that a trust bank is a mixture of a consultant, a custodian and a fiduciary to some degree.

"One of lessons around the world is that the basic appeal of outsourcing is very strong. In Japan, it seems to me that the market might evolve through a partnership between a fiduciary and a trust bank. That might be a structure you might expect to see, and a local form of evolution."

As for the merger, and aside from the opportunity it will offer to add BGI's passive management capability to the mix, Dyson sees even more potential for advice driven solutions. "What's exciting about the combination of BlackRock and BGI is the solutions capability because I think both organisations are perceived as being strong in that space," he concludes.

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