UK - Heavy reliance on equities in the UK means fiduciary managers have been unable to stabilise pension scheme's funding levels, SEI has claimed, which has meant that the fiduciary management industry has been less able to demonstrate its case.

Arguing the case for fiduciary management, Ashish Kapur, European head of institutional solutions at SEI, said that the way forward was to sufficiently diversify a pension fund's investment portfolio into alternatives.

"Heavy reliance on equities within pension schemes in the UK without appropriately monitoring and managing the down side has led to unstable funding levels. This has been further impacted by flat equity market returns over the last decade, which have not rewarded pension schemes for taking risk. Diversification into alternative asset classes, increasing emphasis on asset allocation and proactive management of the downside risk should help pension funds improve funding levels over the next decade," said Kapur.

Kapur further commented on fiduciary management: "If you define success as having managed to reduce the volatility of pension schemes' funding levels, have we managed to allow the trustees to have a good night's sleep?  Yes," Kapur reasoned. "Have we, as a whole fiduciary management industry, managed to improve pension fund funding levels and remove the pensions crisis? The answer is no. But, that's not our fault."

Despite this, Kapur also sees fiduciary management as the solution for those pension funds not yet stable enough to afford a full buyout. "[Fiduciary management] is the half way house, to lead you to the full buyout, until you can actually get to it." 

Figures this week published by Lane Clark & Peacock estimate the buyout market will be about £15bn (€17.6bn) in 2010, and a calculation by BlackRock in autumn 2008 put the worth of the fiduciary management industry in the UK at £300bn (€351bn) by 2012. (See earlier IPE articles: Increased de-risking may drive up buyout costs
 and UK fiduciary growth to hit £300bn)