Pensions - Articles - Larger Pension Schemes turn to Fiduciary Management

While fiduciary management has become an established route allowing smaller schemes to find a broader investment and governance bundled solutions, at BlackRock we are increasingly seeing larger schemes considering delegated investment on both a full and partial basis. And the evidence for this is not just anecdotal.

 by Sion Cole, UK Head of Fiduciary Management, BlackRock
 Having reviewed two years’ worth of RFPs, we have determined that the median size of mandates looking at fiduciary management comes in at £381mn, the average being £910mn. External data sources support this development in the UK market. For example, at an industry conference last month, IC Select’s Donny Hay suggested that median figure could be even higher at £450mn and, albeit a small rise, the latest KPMG UK Fiduciary Management Survey reported a 1% increase of schemes in the £250mn to £500mn range using a fiduciary manager.
 What could be the reason behind this trend? Based on our conversations with schemes, the biggest driver of this trend can be attributed to one prevailing factor: performance. To date, fiduciary management has largely been adopted by small and mid-size schemes who over the past decade have seen remarkable improvements in funding levels. Earlier this year, Willis Towers Watson released figures showing that their fiduciary management clients – consisting of UK DB pension schemes ranging from £50m in size to over £3bn in assets – had seen their funding levels improve by 23.1% over 10 years compared to the 8.8% improvement seen by the average UK DB pension fund. Costs also play a factor here as running a scheme in-house is not only expensive, but also time-consuming. Naturally, this has left many traditionally-run larger schemes wondering why they have not considered fiduciary management sooner given the results are so compelling. We expect this trend to continue.

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