KPMG: U.K. pension funds increasingly moving to fiduciary management

The U.K. fiduciary management market grew 22% to £72 billion ($115.2 billion) of assets in the year ended June 30, with consultants continuing to dominate the marketplace in terms of providers, a KPMG report showed.

The asset growth, however, was skewed by the inclusion of two new providers in KPMG's survey, Cambridge Associates and JLT. Excluding the new providers, asset growth was 17%.

The number of contracts also grew, by 47% to 508. Excluding the new providers in the survey, contracts grew 19%.

KPMG's annual survey found that more than 300 U.K. pension funds are now using fiduciary management on a full delegation basis, an increase of 44% from last year's survey, or 16% excluding the new entrants.

Consultants won a large number of small contracts over the year ended June 30, said Anthony Webb, head of fiduciary management research at KPMG, in the report about the survey. He said 89% of contracts have less than £250 million in assets.

The survey looked at both partial and full delegation.

Mr. Webb added that “there continues to be relatively little competition in the tendering process in the fiduciary management market.” More than 80% of new contracts over the year, he said, were won on an “uncontested basis” — that is, other providers did not provide fee quotes. However, the number of contracts appointing independent advisers to oversee the fiduciary manager increased over the period to 32 from 24 in 2013. This, Mr. Webb, said was more common among larger pension funds.

KPMG also expects to see an increase in switching between providers, as triennial fiduciary management reviews occur.

There is, however, a lack of fiduciary management investment performance available to the survey. “Not all fiduciary managers will share their performance data; there is no consensus in the industry about how performance should be judged even when it is available,” Mr. Webb wrote in the report. “The result is that it is unfortunately not yet possible to say how the fiduciary management market has performed.”