Recent research conducted by consultancy Isio has found that all fiduciary managers participating in its survey in the UK underperformed their return objectives, however, most outperformed the low governance option.
The CFA Institute’s Global Investment Performance Standards (GIPS) for fiduciary managers, approved by the Competition and Markets Authority (CMA) in December 2019, help pension fund trustees select and monitor fiduciary managers by enabling performance comparison, allowing for variables such as return targets and hedging levels.
The CMA has also mandated fiduciary managers to provide this information to trustees when considering fiduciary management as an option.
Paula Champion, partner and head of fiduciary management at Isio, said: “The intervention of the CMA has really changed the fiduciary management landscape, providing a long-awaited injection of competition into the market. Those put in charge of managing billions of assets need to be accountable for their actions.”
She said that GIPS data is a “fundamental improvement in performance transparency and comparability”, but the process of being able to use the data effectively is still in its infancy.
Furthermore, Isio’s report – A beginner’s guide to assessing fiduciary manager performance – released yesterday, highlighted a noticeable disparity in performance.
It analysed three years of GIPS data from 12* fiduciary managers, which together manage over 90% of UK fiduciary management assets under management.
The report not only compares the fiduciary managers amongst themselves, but also against a low governance option that follows a simple investment strategy, allowing pension fund trustees to assess whether they are receiving value for money from their provider.
“Our report aims to guide trustees and pension scheme stakeholders through the key questions they should be asking,” Champion said.
W.R. Swann scheme picks Aon for fiduciary management
In other news, the W.R. Swann & Co Limited Retirement Benefits Scheme has appointed Aon to provide fiduciary management services.
The £40m scheme appointed the firm after a competitive tender process. The move followed an investment strategy review that highlighted the opportunity to reduce risk and costs by adopting a fiduciary management approach, the scheme said.
Mike Hirst, chair of trustees at the fund, said: “While, as a trustee board, we wanted to retain the ability to agree the strategic direction of the scheme, we were convinced that the most effective future approach was to let Aon’s investment professionals make the day-to-day decisions.”
He added: “Once all was confirmed, we were especially pleased that Aon made the onboarding process so easy. The contract was agreed quickly, and our assets were transitioned within two months of us agreeing to work together.”
He said that the scheme had already benefited from the move as it hit “two de-risking triggers well ahead of our planned schedule, as well as taking a significant weight off the shoulders of the trustees”.
“Ironically, while we have delegated the day-to-day services, we now feel more in control of the scheme’s finances,” he said.
* Participating fiduciary managers include: Aon Hewitt, BlackRock, Cardano, Charles Stanley Asset Management, Goldman Sachs Asset Management, Kempen, Mercer, River & Mercantile, Russel Investments, Schroders, SEI and Willis Towers Watson.