More than two-thirds of U.K. corporate and public pension funds and their consultants surveyed on fiduciary management have implemented a partial or full fiduciary management arrangement, or are considering moving to the model.
Only 31% of the 73 pension funds and their consultants surveyed by Buck Consultants say they are not considering the arrangements, with conflicts of interest and high fees acting as deterrents to outsourcing these investment roles.
Twenty-seven percent have implemented a partial or full fiduciary management arrangement, and a further 42% are considering it. A spokeswoman said this was the first time Buck has done this survey.
However, of the 31% that said they have not considered fiduciary management, the biggest reason is that they do not see the benefits. Concerns over high fees with lower transparency was the reason for 21% of respondents, and 12% said perceived conflicts of interest are a worry.
The conflicts-of-interest concern was reflected in responses to the question of who is seen to be benefiting most from the growth in fiduciary management. More than half (51%) of all respondents said investment consultants had seen the most growth, and 29% of those who had appointed a fiduciary manager said they had turned to their existing consultant rather than conducting a competitive procurement process.
One-quarter of respondents said they would run a competitive procurement process with a third-party evaluator to select their fiduciary manager. Of those who had already hired one, 15% used a third party.
“I think (the concerns over transparency, fees and conflicts of interest) can be overcome through understanding, knowledge and communication,” said Brian McCauley, head of fiduciary manager evaluation at Buck Consultants, in a telephone interview. “It is a question of can you manage (the concerns) or do you still feel uncomfortable. With help, concerns can be overcome. (Those concerns are) justified in the sense that some potential clients still feel that way, but I think with the right information they can be allayed.”
The U.K. fiduciary assets under management stood at £58 billion ($99.4 billion) as of June 30, 2013, according to a KPMG survey published in November, equating to about 5% of total defined benefit assets in the U.K.