The average size of a UK pension scheme taking on a fiduciary manager increased by nearly 80% during the first half of the year, according to IC Select, which said the benefits of the model had taken hold against the backdrop of the coronavirus pandemic.
From its latest annual survey of the fiduciary management sector, the company found that the average size of a UK pension scheme recruiting a fiduciary manager to oversee its assets rose by 79% to £270m (€314m) over the six months to 30 June 2021.
The average figure over the preceding five years was roughly £150m.
The figure for average scheme size for the H1 period excludes the funds of two large schemes that have recently transferred to fiduciary management from in-house management. Had their combined assets been included in the analysis, the average scheme size would have increased to more than £1.3bn, IC Select said.
IC Select said it is the only UK company that focuses entirely on selecting and monitoring investment consultants and fiduciary managers, and that this is the first time that it has made the findings of its annual fiduciary management surveys public.
In its survey report, it said that with the onset of COVID-19, the number of schemes switching to fiduciary management dropped significantly (45%) in 2020, but that the conversation rate largely recovered during the first half of 2021.
Anne-Marie Gillon, director and head of research at IC Select, said much of the significant increase in fiduciary management adoption in recent years had been driven by increasing complexity of investment solutions and the economies of scale that can be achieved, particularly for smaller schemes.
“However, the reassessment of governance practices, as a result of Covid, at the same time as a need to react to rapidly changing markets, appears to have given a further boost to the sector,” she said.
Other main findings of its survey analysis, according to IC Select, were that:
- The UK fiduciary management market has almost doubled in size (+96%) by number of funds over five years. Growth by assets under management in the same period has been 170%;
- Incumbent providers won the vast majority (78%) of contracts that were retendered by 30 June 2021 to meet rules introduced by the Competition and Markets Authority;
- Relatively few (10%) schemes that use fiduciary managers receive strategic advice from a third party; and
- Only a minority of schemes (31%) commission independent oversight, despite encouragement from The Pensions Regulator.
IC Select also said it estimated there were a further 74 CMA retenders that would have to be completed in the coming years, after the 209 that were carried out in the last 18 months.
It said the timing of the forthcoming tenders would be spread over the next few years, and that the suggested run rate would be “well within the capacity of the fiduciary management sector to absorb without a strain on resources”.