Trustees should focus more on achieving better funding levels when appointing a fiduciary manager, in addition to the governance benefits that can be achieved, Cardano has said.

Cardano UK head of clients Richard Dowell said that good governance itself is not the aim, although it should help facilitate the desired results.

“For example, a fiduciary manager may have responded quickly to serious problems at one of the underlying fund managers and moved quickly to replace them, improving performance by £1m or so compared to staying with the manager. This looks like good governance, because the fiduciary manager responded faster than the trustees could. But in the meantime, the funding deficit may have increased by £100m, because no one was focusing on protecting against falling equity markets or interest rates, which are much more material,” he explained.

“Improving the speed of decision-making and becoming more responsive to investment opportunities and risks is certainly important. However to be most aligned with trustees’ objectives we believe that fiduciary managers should be prepared to be measured based upon improving the scheme’s funding level in a planned and controlled way.”

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