'Modular' fiduciary management gaining ground over wholesale mandates

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  • 'Modular' fiduciary management gaining ground over wholesale mandates

NETHERLANDS - Fiduciary management is still a growth sector in the Netherlands, with expansion mostly attributed to partial, modular mandates and full-service fiduciary mandates losing ground, according to research by IPE's sister publication IPNederland.

Over two-thirds of the 25 pension funds surveyed use some form of fiduciary management and more than three-quarters indicated they did not believe fiduciary management necessarily would lead trustee boards to relinquish control of their funds.

Respondents to IPNederland's 2011 Fiduciary Management Survey, accounting for €221bn of the Dutch total €1.2trn in pension assets, demonstrated that the approach was still gaining ground, with the percentage of respondents presently using the services of a fiduciary manager increasing by 11 percentage points to 68% since last year's study.

Interest in partial mandates and modular fiduciary management saw the biggest increase, growing by 13 percentage points from last year. The percentage of pension funds opting for full service fiduciary management, by contrast, declined by 1 percentage point.

Further, the percentage of pension funds who indicated they were not at all interested in fiduciary solutions continued to decline - from over 57% in 2008 to around 42% in 2009, falling to nearly 31% last year and to just 24% in 2011.

However, the market appears to be approaching a saturation point. For the second consecutive year, none of the respondents were planning to opt for full service fiduciary management in the future, while only 8% were considering a partial or modular mandate - a decline of about 3.5 percentage points from last year.

Dutch regulator De Nederlandsche Bank (DNB) has warned trustee boards not to delegate overall control of their fund to fiduciary managers and to ensure the fund has sufficient countervailing power.

With regards to such countervailing power, Dutch pension schemes were more confident than a year ago. While 2011 saw one in five respondents believe that trustee boards 'always' relinquished too much control when they opted for fiduciary management; this figure stood at 30% only a year ago.

In 2010, some 58% of respondents also believed trustee boards could be sufficiently in control when opting for a fiduciary management solution; while respondents to the current survey showed 76% thought fiduciary management did not necessarily mean trustee boards lost too much control.

To ensure the trustee board remains in control, pension funds increasingly rely on their own organisation as opposed to external expertise.

In 2011, as in 2010, pension funds preferred to have an internal trustee support department monitor their fiduciary manager, but while in 2010 nearly 28% of respondents relied on an external advisor, in 2011 this percentage has declined to just 10.5%.

The current survey - covering 25 funds with assets under management ranging from €77m to €105bn - also found over 26% of respondents relied on an internal risk manager, compared to over 11% the previous year.

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