Key highlights from the report:
• Strong performance in 2024: 2024 saw impressive returns across all FMs, with the highest performer achieving a 12.5% return. This was largely driven by the resurgence in equity markets, particularly tech stocks, which experienced significant growth.
• Divergence in performance: However, the report highlights notable performance variations among FMs, with a 7.3% difference between the highest and lowest performers. This divergence was especially evident in the first and last quarters of 2024, reflecting market volatility during those periods.
• Risk-adjusted returns: On a risk-adjusted basis, most FMs outperformed diversified growth funds over one-year and five-year periods. However, not all FMs added value, emphasising the importance for trustees to carefully assess the cost-benefit of active management and tactical asset allocation.
• Actual vs. model portfolio returns: A significant finding of the report is the discrepancy between actual scheme growth portfolio returns and the model portfolios presented by FMs. Many actual portfolios underperformed relative to their model counterparts, raising questions about the appropriateness of growth portfolio targets and the alignment of model assumptions with real-world outcomes.
André Kerr, Head of Fiduciary Management Oversight at XPS, said: "Despite 2024 being a favourable market for most growth assets we still have seen a divergence in performance from FMs and a wide range of outcomes for pension schemes. Since the end of February 2025 markets have been exceptionally volatile, with the volatility expected too continue through 2025. We expect that the performance of FMs and the experience of clients to be vastly different and may see a reversal of some of the performance of FMs seen in 2024.”
XPS Fiduciary Manager review 2025
|
