Fiduciary managers (FM) have struggled to deliver their 2018 performance targets “following the worst year for financial markets since 2011”, XPS Pensions Group has revealed.

In its first FM Watch report, which assesses the growth portfolio performance and risk, XPS found that FMs underperformed from 6 per cent to over 11 per cent.

This could have resulted in losses ranging between £4m and £8m on a £100m scheme with 70 per cent exposure to growth assets.

Commenting on the findings, XPS head of fiduciary oversight, André Kerr, said: “The performance of fiduciary managers’ growth portfolios has disappointed in 2018. This is what we’d expect if market exposures rather than manager skill were driving returns, which is something we prefer to see.”

Longer term performance was much stronger but delivered a wider range of outcomes, with the difference between the best and worst performance equated to 28 per cent over a five-year period.

Kerr added: “However, their performance over the longer-term has been good, with most achieving their targets and outperforming diversified growth funds.

"It’s difficult to draw conclusions from just one year’s performance, especially when we’ve experienced such testing markets. It’s only through continued tracking that we will determine whether 2018 was a blip or something more worrying.

“The range of outcomes in performance shows that not all FMs are the same. This is why it’s really important that schemes considering fiduciary management appoint the right provider for their needs.

“The number of UK pension schemes having appointed an FM is growing, with around 1,000 schemes using some form of fiduciary management, representing assets of over £160bn, so performance could have a huge impact on UK pension schemes.”

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