Fiduciary managers (FMs) may be missing opportunities to add value for pension schemes due to increasingly cautious investment approaches, according to Barnett Waddingham's latest Fiduciary Management Investment Performance Review.

The consultancy's sixth annual review, which draws on Global Investment Performance Standards (GIPS) data covering more than £70bn of assets under management, found that investment outcomes continued to cluster across providers despite differing portfolio strategies.

Barnett Waddingham suggested this pointed to an increasingly risk-averse mindset across the fiduciary management market, even as financial markets have remained broadly supportive over recent years.

The report revealed that while most schemes achieved their investment objectives in 2025, cautious positioning may have prevented some fiduciary managers from fully capitalising on market opportunities during a three-year period of generally favourable conditions.

According to the review, the majority of fiduciary managers either met or outperformed their scheme-specific investment objectives over the year to 31 December 2025.

However, managers found it more difficult to deliver on schemes targeting higher returns.

Indeed, the report suggested that allocations to private markets detracted from performance in some cases, while lower exposure to public equities also limited participation in strong market returns.

Barnett Waddingham also identified emerging performance trends across the fiduciary management market, noting that while there is no consistent top performer year-on-year, some providers are beginning to appear more regularly in either the top or bottom half of peer group rankings over longer periods.

The consultancy argued that relative performance is becoming an increasingly important measure of value for money, particularly during periods of strong market performance.

Meanwhile, the review highlighted liability hedging as an area requiring greater scrutiny by trustees.

With many schemes now targeting lower returns and operating lower-risk investment strategies, Barnett Waddingham said liability hedging arrangements account for a greater proportion of overall investment risk than in previous years.

The report noted that the increasing use of in-house liability-driven investment (LDI) implementation means some fiduciary managers are now responsible for multiple aspects of the hedging process, including strategic hedge levels, portfolio design and implementation.

As a result, the consultancy said independent oversight of hedging arrangements has become increasingly important.

Looking ahead, fiduciary managers identified geopolitical instability as the biggest challenge facing schemes in 2026 and beyond, with ongoing uncertainty expected to affect both growth assets and hedging strategies.

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