UK fiduciary managers produced a wide range of performance outcomes last year despite buoyant market conditions, according to research from XPS Pensions Group.

Focussing on the “best ideas” growth portfolios, net of fees, of 16 fiduciary managers, the pensions consultancy found there was a 12 percentage point difference between the best and worst performing managers, with the worst returning 8.3% and the best 20.5%.

Over a three-year period, the return difference between the fiduciary manager with the best and worst return equated to a 20% cumulative difference.

Compared with a selection of more than 20 high-profile DGFs, the majority of fiduciary managers in 2019 delivered returns broadly in line with or above the median DGF return.

André Kerr, head of fiduciary oversight at XPS Pensions Group, said: “While the risk profile of the investment strategies used by the strongest performers won’t suit every scheme, we would have expected all fiduciary managers to have outperformed the average DGF given the favourable market conditions of 2019.”

According to XPS’ analysis, the fiduciary managers who achieved the greatest returns over one and three years did so with a higher allocation to equity markets, thereby also registering the greatest volatility of returns.

Looking ahead to the COVID-19-triggered market downturn in the first quarter of 2020, Kerr told IPE that the managers that did well last year with high equity allocations “were probably the best positioned coming into Q1”.

XPS has analysed fiduciary managers’ 2020 first quarter performance for a report due out soon, and Kerr said the dispersion was once again large, at around 14 percentage points.

“COVID-19 represents the first major test for fiduciary managers, as most did not provide a UK offering during the global financial crisis of 2008/09,” he said.

“In order for schemes to benefit over the long term from strong performance of their fiduciary manager during 2019, their portfolios also need to be resilient to downside shocks to financial markets.”

The full report can be found here.

Isio DB platform attracts 40th scheme

The Cumberland Building Society Pension and Assurance Scheme, with around £60m (€67m) in assets, has joined an operational consolidation platform run by Isio, a newly launched pensions advisory firm.

Governed by Entrust Pension Limited, an independent professional trustee company, Enplan Pension Platform offers defined benefit schemes a “one-stop shop” for specialist governance solutions, professional advice and technology, and bespoke strategic direction. It can help employers modernise the running of legacy DB schemes.

Richard Ellison, chief financial officer at The Cumberland Building Society, said: “Following a competitive tender process, we appointed Enplan for the clear benefits we saw in their ability to simplify the operation of our DB pension scheme and bring it in line with the strategic objectives of the Society more widely.

“The additional upside we found is their continuous and professional governance. Enplan is an effective solution for building societies at a time when the industry is focused on improving governance and creating efficiencies.”

The Cumberland Building Society’s DB pension scheme covers 450 members across the company’s key operations centres in the north of England and Scotland.

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