Fiduciary management sector growth slows in 2020/21

Overall growth in the fiduciary management (FM) space was positive over the past 12 months, but slowed in comparison to the preceding year, Isio has revealed.

Its annual Latest trends in FM survey found that 2020/21 had been a turbulent year for the FM sector due to an increased level of scrutiny in the run up to the Competition and Markets Authority (CMA) Order deadline in June 2021 and “uncharted market conditions” driven by the pandemic.

Total assets under management increase by around 16 per cent over the year, driven by a small number of “very large” new partial mandates in the market.

There was a slight decline in the growth in fully delegated mandates assets under management overall, despite the expectation of an increase due to positive market conditions.

The data for the survey was collected for the 12 months to 30 June 2021.

The majority of activity was due to the retender of mandates, driven by the CMA Order deadline, which resulted in a “small percentage” of mandates shifting between managers.

The number of retender exercises participated in by FMs for fully delegated mandates increased by 345 per cent compared to the prior year, with at least 86 per cent of schemes staying with their incumbent FM.

There was a “significant” reduction in fiduciary fees for pension schemes that retendered, according to the report.

A scheme with assets of £250m saw their ongoing fiduciary fees fall by an average of £25,000 a year.

Additionally, the increased focus on regulation resulted in a shift towards the use of third-party evaluators, which the survey stated was evident for both selection exercises and ongoing oversight.

“Against a backdrop of the CMA order and Covid-19, 2021 was always going to be an interesting year, but whether it’s had the outcome most expected is still up for debate,” commented Isio head of fiduciary oversight, Paula Champion.

“It’s clear the retendering process has had a positive impact on the sector, with greater engagement and innovation from FMs, but the number of schemes staying with their incumbent but for a lower fee is perhaps not the outcome the CMA expected back in 2019.

“The market volatility caused by the pandemic has arguably encouraged many to stick with the familiar but it’s clear clients have used the process to ensure they are getting better value for money, which can only be a good thing.

“The increase of third-party evaluators is also a very positive step for better managing risk in pension schemes with fiduciary management. The way FMs have responded to the new ESG requirements demonstrates that the market is becoming more accountable, with 86 per cent of FM clients amending their ESG policy over the last 12 months, compared to 75 per cent in 2020.

“And, as the industry settles back to normal levels of activity next year, it will be interesting to see in our 2022 survey if growth continues at the pace previously seen and how managers continue to demonstrate their value and stay effective, especially if charging less.”

    Share Story:

Recent Stories

A time for fixed income
Francesca Fabrizi discusses fixed income trends and opportunities with Goldman Sachs Asset Management Head of UK Pensions Solutions, Fixed Income Portfolio Management, Henry Hughes, in our Pensions Age video interview

Purposeful run-on
Laura Blows discusses purposeful run-on for DB schemes with Isio director, actuarial and consulting, Matt Brown, in Pensions Age’s latest video interview
Find out more about Purposeful Run On

Keeping on track
In the latest Pensions Age podcast, Sophie Smith talks to Pensions Dashboards Programme (PDP) principal, Chris Curry, about the latest pensions dashboards developments, and the work still needed to stay on track
Building investments in a DC world
In the latest Pensions Age podcast, Sophie Smith talks to USS Investment Management’s head of investment product management, Naomi Clark, about the USS’ DC investments and its journey into private markets