EUROPE - The concept of fiduciary management has been largely misunderstood in Germany and is not about "yielding decision-making powers", asset managers have said.
Last week, a number of consultants told IPE that fiduciary management was struggling to take off in Germany because institutional investors wanted to "remain in the driver's seat".
Responding to their dim view of the practice, Michael Schütze, managing director of the newly created Allianz Corporate Pension Advisors, said: "Fiduciary management is not about yielding decision-making powers - it's about having a service provider that makes it possible for the investor to concentrate on final strategic decisions and controlling.
"But it seems not everyone is defining fiduciary management this way."
He added that, for this reason, some in the industry already unofficially used the term 'fiduciary management 2.0' to reflect the "new quality of governance and transparency".
He also pointed out that, in the Netherlands, the term 'fiduciary management' was hardly used anymore because of "mixed experiences" with the first attempts at the service, where transparency was not always observed and too much power was given to the fiduciary manager.
Oscar Vermeulen, director and co-founder of Swiss Altis Investment Management, said he saw fiduciary management as a "toolkit" that helped pension funds to tackle the challenges they faced.
Alfonso Papa, chief executive at ING Investment Management Switzerland, said: "It is often astonishing how limited the tools are used to manage larger sums."
According to Papa, investors often focus on manager selection while paying less attention to controlling and efficient risk management.
A fiduciary manager can also help add new competences, says Vermeulen, who refers to "insourcing" rather than "outsourcing" when it comes to fiduciary management.
Allianz's Schütze did not discount possible conflicts of interest, but he said he was convinced the issue could be resolved transparently and that fiduciary management helped clients to "enhance their investment structure".
He added: "With some investors, the fiduciary manager is forbidden to manage any money, and others are capping the amount."
He stressed that the service was not a 'black box', but a transparent way of making asset management decisions and unifying reporting.
He said he did not see consultants building skills in the operative implementation of strategic asset allocation and noted that some asset managers were already at par with consultants in some advisory sectors.
"But in the end," he added, "the client decides who gets which part of the value chain - and fiduciary managers very seldom are asked to do everything."
However, when asked about the extra costs involved, Schütze conceded smaller pension funds might find it hard to move toward fiduciary management.