GLOBAL - Pension industry experts predict the fiduciary management model will spread deeper into Europe and other parts of the world, and expand its reach beyond DB plans to the likes of insurance companies and DC plans.
New research by UK-based investment market researcher Spence Johnson showed as the fiduciary management market in the Netherlands becomes saturated, many managers have turned to other parts of the world looking for business, and are optimistic they will find it.
In an exclusive interview with Global Pensions, Spence Johnson investment communications consultant Nigel Birch said investors around the globe have been questioning the traditional consulting models.
"The last 18 months, trustees have felt alone in there hours of need." He added that the feeling of "working together in partnership for the good of the fund" will encourage the spread of fiduciary management.
Birch said fiduciary managers were seeing interest from pension funds in Germany, Switzerland, Ireland and Scandinavia.
And Birch said in some cases, managers interviewed said interest was even coming from Japan. "Areas like Japan have similar drivers to those in Europe".
Participants in the Fiduciary Management: Five Futures Study said in Europe, growth will come from markets with well developed pension systems, and that the key factor driving the use of fiduciary managers will be "the need to pool assets and increasing regulation".
One respondent said: "The difference will be where the regulator allows assets to be put on the balance sheet."
Predictions on the UK market were mixed, with some expecting a surge in mandates, and another saying "trustees enjoy pension management. I don't think it will take off like in the Dutch market."
Germany, respondents said, has good potential, but is "in the twilight zone at the moment" with some companies putting assets on their balance sheets and others not.
An exception this past year was German company Henkel.
Birch said the Henkel deal with BlackRock, where the firm hired the manager to oversee its pension assets in five different countries earlier this year, exemplifies the spread of fiduciary management.
"That deal may well be the first of many - schemes need scale, consistence and expertise. By unifying schemes in different geographies, corporations achieve a critical mass to be able to negotiate favourable terms with fiduciary managers. As European regulation becomes more unified, we will see this becoming more and more popular," he said.
The deal marked the first time the entire pension assets of a multi-national company were outsourced to an external manager. "That's something we're going to see more of," he said.
Fiduciary managers also expect their client base to spread into the insurance and defined contribution markets.
"Insurance companies have the same fundamental problems as pension funds...they have the need for expertise and scale," said Birch.
One provider interviewed by Spence Johnson said: "DC has the same issues of finite governance and increasing burdens, so I think fiduciary management has a role to play here. DC will prove a more popular area of fiduciary management skills over time because the question will be asked, ‘are individuals equipped?'"
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