Rapid Growth For UK Fiduciary Management

21 November 2011 (PLANSPONSOREurope.com) – The UK fiduciary management market has experienced rapid growth but uncertainty reigns over its future prospects, according to KPMG.

KPMG’s review of the market reveals that it now comprises 4% of total UK pension scheme assets under management (AUM), with over 200 pension scheme mandates.

The review reveals implemented consultants dominate the market by AuM and number of clients - with most appointments made without consulting alternative providers or considering the wider market.

The review also reveals performance measurement, benchmarks and fee structures vary widely and with each provider adopting their own approach, there is little consistency within the market.

Following a period of initial growth in this market, there is now uncertainty around the future prospects for FM with provider expectations of future market growth varying significantly.

Patrick McCoy, Pensions Partner and Head of Investment Advisory at KPMG in the UK, said: “It is clear that the nascent fiduciary management market in the UK has experienced a period of rapid growth and is now emerging into a more mature growth phase. The expectation for future growth and acceptance of fiduciary management among UK pension schemes varies widely according to this survey of the market participants.

“Not untypical for a new and developing asset management market, standardisation of benchmarks and comparability is still to emerge. Our survey finds a wide variation in how performance, as well as the success or failure of fiduciary management, is measured. This makes the establishment of market benchmarks and comparators difficult. Therefore, while the industry uses performance fees to a large degree there is no consistent definition and application of performance fees. These findings are in line with our experience at KPMG where we see a lot of demand for independent advice in setting up performance measurement and compensation structures for FM.

“As FM develops, in terms of both public knowledge and the universe of providers available in the UK market, we believe there will be increased pressure on providers to offer transparency and adhere to market standards as these develop. Going forward, we also expect that the majority of FM appointments will be made via a competitive tender process – as is the case with nearly all other investment management appointments.“

PLANSPONSOREurope Staff
editors@plansponsoreurope.com