Pension scheme FM mandates see slowdown in growth

Growth in fiduciary management mandates has slowed in 2018, growing by 9 per cent in the 12 months to June, compared to 30 per cent in 2017, analysis by KPMG has found.

It is the lowest level since KPMG began tracking the pension scheme fiduciary market in 2008. KPMG head of fiduciary management research, Anthony Webb, said that the CMA review into the investment consultant and fiduciary management market is “probably a key factor”. He explained that some trustees adopted a ‘wait and see’ approach while the investigation was carried out.

“It now seems likely that UK fiduciary managers will not significantly change their investment offering to pension schemes as a consequence of the CMA review – so this year may represent a blip rather than a signal for lower growth rates in the long term,” he said.

Most pension schemes using fiduciary management are yet to fully integrate independent advice in their ongoing operations but independent oversight did increase for new appointments from 60 per cent in 2017 to 66 per cent in 2018. The number of schemes seeking independent and ongoing oversight of their fiduciary arrangements saw a small rise – increasing slightly from 19 per cent to 21 per cent in 2018.

Furthermore, the survey found room for improvement when it came to environmental, social and governance (ESG) issues. The majority of schemes (58 per cent) demonstrated some ESG-related engagement between fiduciary managers and Trustees. However, the remaining 42 per cent of schemes had no formal engagement on ESG over the past year – representing approximately 350 schemes.

KPMG assistant head of fiduciary management, Faye Mullen, said: “Pleasingly, independent oversight has increased for schemes when appointing new mandates but is still lacking on an ongoing basis. There is room for improvement in how trustees and their fiduciary managers engage on environmental, social and governance (ESG) issues.

“There is increasing attention on how ESG policies are managed within pension scheme investment strategy, including new requirements for trustees that were recently set out by the Department of Work and Pensions. Trustees, with help from their provider, will be encouraged to demonstrate greater ESG engagement in future, and we look forward to seeing how fiduciary managers help their clients tackle this.”

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