The U.K.’s fiduciary management sector is “bouncing back,” with the market increasing 15% in value in 2023, according to a report from Edinburgh-based investment service IC Select.
The sector’s resurgence follows a challenging 2022, which came to be defined by then Prime Minister Liz Truss’ disastrous “mini-budget” proposals which caused havoc in the U.K. markets.
The IC Select report also found that there has been a steady reduction in the proportion of pension plans using a third party evaluator for investment selection over the last three years, with 58% of searches using a TPE in 2023, down from from 75% in 2021. Despite encouragement from the U.K.’s Pensions Regulator, only a minority of plans (39%) commissioned independent oversight. Also, only 8% of the plans that use fiduciary managers receive strategic advice from a third party.
The report also observed ongoing market consolidation in the sector, following Columbia Threadneedle's exit from the fiduciary management market by the end of 2024, and Mercer's intended acquisition of Cardano, subject to regulatory approvals.
IC Select also noted that following the liability driven investment crisis resulting from the Truss budget, more pension plans are better funded and targeting lower returns above their liabilities, prompting fiduciary managers to adapt their strategies.
"Our survey findings underscore the resilience and adaptability of the U.K. fiduciary management industry," said Anne-Marie Gillon, director and head of research at IC Select. "Despite facing unprecedented challenges, we've observed fiduciary managers evolving their capabilities to meet the changing needs of U.K. defined benefit pension schemes.”
IC Select is part of Independent Governance Group, a U.K. company that selects and monitors investment consultants, fiduciary managers and defined contribution master trusts.
