U.K. pension funds choosing outside fiduciary managers are getting bigger, according to an annual survey published Tuesday by IC Select, an independent firm working with investment consultants and fiduciary managers.
In the first half of 2021, the average pension fund size with an OCIO increased 79%, to £270 million ($374 million), the fiduciary manager survey found. That is an increase of £120 million over the average figure over the preceding five years, according to IC Select's research. The first half of the year saw one of the biggest OCIO deals ever with British Airways appointing BlackRock as outsourced CIO for £21.5 billion in assets in two plans.
Over the five years, the market has nearly doubled and assets under management have grown by 170%. The survey also found that incumbent providers won new contracts 78% of the time.
The annual survey, being made public for the first time, involved 17 fiduciary managers — Aon, BlackRock, BMO Financial Group, Cambridge Associates, Cardano, Charles Stanley Asset Management, Goldman Sachs Asset Management, Kempen Capital Management, Legal & General Investment Management, LGT Vestra, Mercer, River and Mercantile, Russell Investments, Schroders, SEI, State Street Global Advisors and Willis Towers Watson.
Anne-Marie Gillon, IC Select director and head of research, said in an interview that some of the increase in outside fiduciary management has been driven by the economies of scale from outsourcing, but also by "the quick moving markets due to COVID. If you have one asset manager, they can do a lot of tactical moves. There is a bit of nimbleness about it" that is also appealing to larger pension funds, she said.
In the latest survey, only 31% of pension funds had independent oversight, but that could increase as well, said Ms. Gillon. "In the U.K., there is so much more regulation coming into place. There is a lot for trustees to do."
