Turbulent markets damaged fiduciary managers’ ability to achieve client-specific objectives, says Isio, with none meeting the target.
Analysis of three years of global investment performance standards (GIPS) data for 12 fiduciary managers found, however, that almost all had significantly outperformed a low governance option.
The data relates to around 90% of UK fiduciary management assets under management, and finds that exposure to equities had driven the most positive performance over the past five years.
GIPS were developed by the CFA Institute, and approved by the Competition and Markers Authority (CMA), to make it easier to select, monitor and compare fiduciary managers.
In A beginner's guide to assessing fiduciary manager performance, published by Isio yesterday (27 May), the consultancy found that, while no manager was able to meet a client return objective of at least 2.5% per annum relative return, almost had achieved a positive return.
The anonymised data revealed that just one manager had seen a negative annualised return over the 2018 to 2020 period, while only one other had achieved a lower annualised return than the low governance benchmark.
All fiduciary managers, however, achieved their returns at a lower annualised risk level than the benchmark - and the average fiduciary manager secured annualised returns of around 1% for annualised risk at around 7%.
The biggest divergence came from managers' ability to both capture upside and protect against downside.
Over the course of 2020, the difference in cumulative return between the best and worst performer peaked at around eight percentage points at 31 March, narrowing to under five percentage points by the end of the year.
Public equities were clearly the best performer over the course of both 2019 and 2020, although real assets performed best in 2018. Conversely, hedge funds were named as the most common detractor over the past five years, with survey participants noting that their complex strategies had not added much to client portfolios.
Isio partner and head of fiduciary management Paula Champion commented: "The intervention of the CMA has really changed the fiduciary management landscape, providing a long-awaited injection of competition into the market. Those put in charge of managing billions of assets need to be accountable for their actions.
"The presence of GIPS data is a fundamental improvement in performance transparency and comparability, but the process of being able to take the data and use it effectively is still in its infancy. Our report aims to guide trustees and pension scheme stakeholders through the key questions they should be asking.
"Finding answers to these questions and considering this type of analysis will not only help them to select the best fiduciary manager for their needs, but ensure they continue to perform well and add value on an ongoing basis."
Earlier this week, a similar survey from XPS Pensions Group found that most managers had maintained their investment strategies throughout 2020 but that growth portfolio returns had ranged significantly.
