Fiduciary mandates surge to £170bn despite CMA probe
The total number of mandates in the market rose 10% in the 12 months to June 2019 despite ongoing challenges stemming from the Competition and Markets Authority investigation into fiduciary management markets, KPMG finds.
Data collated in KPMG's 2019 UK Fiduciary Management Survey shows there were 84 new mandates in the period, which has pushed assets under fiduciary management (AUM) to £172bn this year - representing a 21% increase from £142bn for the 12 months ending June 2018.
The survey also found schemes that use fiduciary managers were most likely (63%) to have less than £100m of assets. This is followed by schemes in the £100m to £250m bracket, which accounts for 22% of the total market. Currently around 3% of schemes using fiduciary management have assets over £1bn.
KPMG head of fiduciary management research Anthony Webb said the figures show the market is finally on-track to reach previous levels of annual growth.
He said: "We do believe that the recent CMA investigation into the industry has held back mandates so the return to growth in the market is encouraging. The sizeable boost in AUM is significant, but helped by rising gilt values and high levels of liability hedging."
KPMG found approximately seven in ten fiduciary managers are targeting 80% hedging or higher and just 27% of mandates had return targets of liabilities of 1.5% or less.
The research additionally asked fiduciary managers about end-game plans for UK mandates once they have reached full funding on a long-term objective. Some 44% said that they would look for a buyout, ahead of 38% who said they would consider run-off.
KPMG also found that nearly all (98%) of surveyed trustees were engaging on environmental, social and governance matters with their fiduciary managers, up from 58% in 2018.
Despite this, it said most fiduciaries were only meeting minimum requirements and are not delivering custom policies on ESG issues.
Webb said: "We have seen most pension schemes undertake ‘light touch reviews' whereas it is the next step of designing and implementing bespoke policies that could lead to real action. It's encouraging to find that ESG factors are now firmly on the agenda for trustees and investment committees when discussing strategy with fiduciary managers.
"However, while their concern matches growing public appetite in this area - combined with regulatory updates - we've seen little evidence so far of changes to behaviour."
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