Fiduciary managers maintained their investment strategies in 2020 despite facing market volatility and big losses in the first quarter, according to XPS Pensions Group.

Analysis from the firm’s annual FM Watch report, which examined the performance of managers across the year, showed that managers generally stood by their plans and did not make "significant or fundamental changes" to their investment strategies following the onset of the pandemic.

All of the 18 fiduciary managers analysed made gains in 2020, with growth portfolio returns ranging from 2 to 16.8 per cent over the full year, although XPS noted that the strength of equities masked variations in performance at different points in the year.

Managers with more risk embedded in their portfolio initially made losses of up to -14.5 per cent in the first quarter of the year, but their strategy of maintaining high exposures to risk assets paid off as many of those with the largest initial losses made strong recoveries over the rest of the year.

XPS head of fiduciary management oversight, André Kerr, said: “Fiduciary managers have weathered the storm of Covid-19, albeit with large variations in fortunes. The fact that fiduciary managers stuck to their guns and trusted their strategies stood them in good stead to recover from the shock to market confidence we saw in Q1.

“However, a more prolonged downturn could have painted a different picture, and some would have faced deep losses by sticking to their original strategy. Trustees should ensure they have selected a manager that shares their outlook on the market and approach to investment in moments of severe financial stress.”

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