- KPMG’s second survey of the UK fiduciary management (“FM”) market finds that the full delegation market currently stands in excess of £23bn, which equates to over 2.4% of total UK pension scheme assets under management (“AUM”), distributed across 174 pension scheme mandates.
- KPMG believes only full delegation mandates can unambiguously be defined as FM. In addition to the £23bn managed on a fully delegated basis there is another £30bn managed on a partly delegated basis across 120 mandates.
- The fully delegated FM market has grown rapidly with a c. 40% year-on-year growth rate and now comprises c. 2.4% of total UK pension scheme assets.
- Around 88% of full delegation mandates are below £250m, with implemented consultancies managing c. 80% of these appointments. There is a trend towards specialist providers and investment managers holding the larger mandates.
- The use of an independent advisor or in-house capabilities post appointment of a FM is increasing, with 30% of UK trustees engaged in full delegation FM using independent advisor or in-house capabilities to monitor, challenge and provide ongoing governance assistance.
KPMG’s 2012 Fiduciary Management UK Market Survey published today highlights that the UK Fiduciary Management market continues to grow at double digit pace, currently comprising c. £23bn of UK pension scheme assets and across 174 UK pension scheme mandates.
The survey brings transparency to the UK fiduciary management market, clearly splitting this £50bn market into the unambiguous ‘full delegation’ FM approach, and the ‘partial delegation’ market, covering a wider range of asset management and advisory services, which makes up c. £30bn in AUM.
Alex Koriath, Head of Fund Manager Research at KPMG comments: “We do not see partial delegation as being consistent with how most observers would define fiduciary management. Instead, we see it as asset management services that range from multi-asset, fund-of-fund to multi manager strategies. These services are being performed in greater AUM sizes by many asset managers who rightly do not try to label them as fiduciary management.”
The full delegation market has grown increasingly quickly over recent periods, with a c. 40% year-on-year growth rate. At current size, the full delegation market accounts for 2.4% of the total UK pension scheme assets.
Within the full delegation FM market, around 88% of all UK mandates are below £250m, with implemented consultants managing c. 80% of these mandates. The number of multi-billion FM mandates in the UK is still low; with only 3 full delegation mandates greater than £1bn in the UK – all of which have been won via competitive tender.
Within larger fully delegated FM mandates, asset managers and specialist providers have a larger market share and seem to be more successful at winning clients. However, given the limited number of competitive selections, implemented consultancies still hold a majority market share in this market section as well.
As at June 2012, there were 120 partial delegation pension scheme mandates within the UK FM market with Investment Consultants holding c. 90% of appointments and 80% of market share. As with full delegation, this segment of the market has also grown strongly at a rate of c. 11% year on year. Over half of this market is made up of single asset class mandates. KPMG note, where strategic direction is not delegated, the distinction between partial FM and a more traditional multi asset or fund of fund products becomes harder to define.
Patrick McCoy, Partner and Head of Investment Advisory at KPMG in the UK, said: “It’s good to see the fiduciary market growing as it provides more choice for pension schemes. This market growth has been dominated by the consultants converting their existing consulting client base. From speaking to a lot of pension funds, I know they are keen to see evidence that the fiduciary model is working before considering it further and in particular which of the providers have been successful. We have collected a lot of data on this and are hoping to be able to publish some useful findings shortly.”
Notes for editors:
Fiduciary Management (“FM” also known in the UK as "Implemented Consulting“, “Delegated Consulting” or "Solvency Management") is a relatively new approach to managing assets of UK defined benefit pension schemes.
FM is a broad concept with no single definition but usually involves the delegation of some responsibilities to a fiduciary manager (the “provider”) with the aim of better utilising trustees' limited time and to allow decisions to be taken and implemented more quickly with clear accountability.
In our survey we distinguish between the ‘full delegation’ approach, whereby a FM manager provides full services across the full assets of a scheme, and the ‘partial delegation’ approach where only a subset of the Scheme assets are delegated and the Trustees retain the remaining responsibilities.
The proportion of UK pension fund assets under FM is still relatively small but continues to grow, with a number of very large schemes having moved to this approach.
For further information please contact:
Margot Cowhig, KPMG Corporate Communications
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KPMG Press Office: 0207 694 8773
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