Goldman Sachs Asset Management has set its sights on capturing 10% of the flows into the UK fiduciary management market for its Global Portfolio Solutions division (GPS), which currently manages worldwide assets worth $22bn (€16.3bn).
The firm, which manages £25bn (€29.7bn) across all UK institutional assets, sees fiduciary management – where an asset manager, consultant or other agent takes the reins of strategic advice, investment implementation and risk management alongside its institutional client – as a fast-growing part of the UK pensions market, albeit still in its early stages.
David Curtis, GSAM head of UK institutional business, told IPE: “Although the trend has yet to be established, we think fiduciary management and delegated solutions will be a major part of the UK market going forward.
“Over the course of next year, fiduciary management is going to be a major business initiative for us.”
The firm claims to be one of the first asset managers to have established a fiduciary management capability, having worked with clients according to the model since 1995.
The vast majority of the GPS assets come from US institutional investors, but the firm said it aims to increase its fiduciary management assets by capturing 10% of the flows into both the US and the UK markets.
A September publication from human resources group Aon Hewitt, ‘Delegated Investment Survey 2013’, found that 36% of the 275 UK defined benefit (DB) scheme respondents, representing some £130bn of assets, had appointed a delegated investment provider, up from 18% in its 2011 survey.
Aon Hewitt estimates that 5% of all UK DB schemes have moved to a fiduciary management approach and expects 25% to have employed a fiduciary manager within the next five years.
While Curtis acknowledged activity among larger UK schemes seems modest, he noted that fiduciary managers have enjoyed considerable success winning mandates from schemes at the £50m mark and below.
“That trend is moving up the food chain – my sense is that there are a lot of schemes in the £100m-150m range that are looking, and that’s where we want to start offering our services and where we are planning a big push,” he said.
Recognising that the UK’s powerful investment consultants, offering their own fiduciary management or ‘implemented consulting’ solutions, could pose a significant barrier to entry, Curtis emphasised that scheme trustees should be aware of the challenges of implementation and not assume fiduciary management services are a natural extension of the traditional consulting role.
However, GSAM has had its own problem as a fiduciary manager, in the key European market of the Netherlands.
Its relationship with transport workers’ scheme Vervoer ended badly in 2012, with the fund suing for damages in an ongoing case in the English courts, alleging unreasonable delays to investment implementation and subprime crisis-related losses.
The Dutch fund has since dropped some of its claims against GSAM.
Curtis declined to comment on this relationship or the court case, but he did underline the importance of clients genuinely “wanting to engage” with the fiduciary management concept.
“This is not about outsourcing, it’s about the client engaging with its service providers in a different way from how they previously engaged,” he said.
“It’s an opportunity for the fiduciary manager to do the day-to-day work so the client can concentrate on the strategic work – and your client needs to be present at the table with you on that strategic work, or else the project fails.”