Fiduciary Managers Favour Active over Passive Managers

30 June 2011 (PLANSPONSOREurope.com) - A recent study by Spence Johnson shows that when it comes to investment managers, Fiduciary Managers strongly prefer active as opposed to passive managers.

Furthermore, the extra costs associated with active investment are increasingly being seen as justified. 

Commenting, Nigel Birch, Director at Spence Johnson, said in a press release: “Active managers are faced with a double jeopardy in European pensions markets. The rapid closure of defined benefit (DB) schemes reliant on active management means that the better active managers perform, the quicker schemes will reach their ‘end goals’ and the sooner managers will lose their mandates. This, coupled with the dominance of passive strategies in the emerging defined contribution (DC) space means Active managers are faced with two options:  look to gain traction in supplying to DC pensions, or seek more sustainable opportunities in the DB sector.  

“Our research has shown that opportunities exist for active managers in the DB market when supplying funds to Fiduciary Managers. The study has also revealed that Fiduciary Management clients have a significant and growing majority allocation to active investment strategies, rising from 56% before 2009 to 68% after.”  

Birch added: “Other findings include the very different criteria Fiduciary Managers have for selecting and working with their external asset managers. A key selection criteria was identified to be innovation; Fiduciary Managers appear more than willing to invest in new and innovative strategies which otherwise would be out of reach for most institutional investors.”  

The survey tracked and collected information from 29 Fiduciary Management providers, representing 517 institutional investors, with collective assets under management of €761bn.  

The Fiduciary Management Market Intelligence survey also found the UK credit crisis has spurred a surge of Fiduciary Management appointments (see Credit Crisis Fuels Fiduciary Management Appointements), and Fiduciary Managers are increasingly trending toward partnering with their custodians, both on governance and to achieve cost savings (see Fiduciary Managers Buddying up with Custodians). 

PLANSPONSOREurope Staff
editors@plansponsoreurope.com