U.K. fiduciary management, once dominated by investment consulting firms, is changing, with money managers adding resources, increasing expertise and gaining traction in a growing market.
“Recent entrants are probably a bit behind, but it is also probably a good time to enter the market,” said Nigel Birch, London-based director at institutional investment research firm Spence Johnson Ltd., which has looked at the U.K. fiduciary management market over the past few years.
“It has matured to an extent where fiduciary management is seen as less of a new idea. By understanding its unique value proposition and the new skill sets required beyond traditional consulting, schemes are more likely to go through tender exercises and at least look outside of their incumbent consultants.”
Research into the U.K. fiduciary management market shows a shift in this direction. Investment consultants controlled 75% of fully delegated fiduciary management allocations for the year ended June 30, according to KPMG's 2013 U.K. fiduciary management market survey. That's about 5% less than a year earlier, KPMG reported.
Money managers account for 3% of fully delegated fiduciary management arrangements, increasing a market share to seven of the 211 contracts active at the end of June 2013 — which seems small but represents a 75% increase from their share a year earlier.
“The winners so far have been the consultants that are seen as trusted advisers to implement advice on (behalf of trustees),” said Ian Barnes, managing director and head of UBS Global Asset Management in the U.K. and Ireland, based in London. “The problem is that consultants do not (traditionally) implement and have that (trading) experience. The big fear in the industry is that one of the consultants has a blowup, because implementing advice is very different to giving it. If that happens, it will either kill the fiduciary management market or really open the door for asset managers.”
The total fiduciary management market encompasses about £58 billion ($96.7 billion), according to KPMG's 2013 survey. That equates to about 5% of total defined benefit assets in the U.K., using the most recent data from the Purple Book, which covers the U.K. DB market and is compiled by the Pensions Regulator and Pension Protection Fund. That compares to £40 billion, or around 4% of total DB assets, in KPMG's 2011 survey.
And that is set to get bigger, say incumbent players.
“There is significant appetite and demand in the U.K. from pension fund trustees and also from corporates,” said Mark Davis, Reigate-based head of business strategy, delegated investment services, at Towers Watson & Co. Towers Watson manages $60 billion of assets on a fiduciary management basis globally, split between about $40 billion in the U.K. and the remainder in the U.S.