Fiduciary Market Growing, ESG Action Minimal, Says Survey

The fiduciary management industry saw assets under management increase 21% to reach £172bn at the end of June this year, up from £142bn as at end-June 2018, according to new research from KPMG. 

The firm’s 2019 UK Fiduciary Management Survey found the total number of mandates in the industry rose by 10% to 946 in the 12 months to 30 June 2019, following the 9% growth in mandates over the preceding 12 months.

The survey results are based on responses received from 19 established fiduciary managers operating in the UK pensions market – including Aon Hewitt, Legal & General and Cardano – using data for the 12 months to 30 June 2019.

Anthony Webb, head of fiduciary management research at KPMG, said: “The return to growth in the market is encouraging, but the increase in new mandates has not yet reached previous levels of 15% annual growth.”

Webb said the sizeable boost in assets under management was significant, but had been helped by rising Gilt values and high levels of liability hedging.

He said he believed that mandates had been held back by the recent Competition and Markets Authority (CMA) investigation into the industry.

He commented: “We expect next year’s survey to capture a surge in tenders, as some early adopters are required to go back to the market and retender to meet the CMA’s requirements.”

Meanwhile, the survey also found that despite a surge in interest in environmental, social and governance (ESG) issues, few pension fund trustees are going beyond the minimum requirements.

Nearly all (98%) of the trustees surveyed were engaging with their fiduciary managers on ESG matters, compared with just over half last year (58%).

But most (87%) had conducted no more than a light-touch review of ESG, only one in ten (10%) had thought about it carefully, and a mere 1% had taken bespoke action, according to the survey.

Many trustees are heavily guided by their providers’ default positions, the survey showed.

Webb said that the concern of trustees and investment committees for ESG matters appeared not to have led to changes in behaviour.

He 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.”

When asked about their “end-game” plans for their full UK mandates once they have reached full funding on a long-term objective, nearly half (44%) of fiduciary managers said they would look for a buy-out, while just over a third (38%) suggested a run-off.