KPMG: Fiduciary Management Gains Steam

(November 21, 2011) – Fiduciary management (FM) mandates in the United Kingdom (UK) have reached £40 billion in total, according to a new study by KPMG.

The study—the 2011 KPMG Fiduciary Management UK Market Survey, obtained by Professional Pensions—indicates that more than 200 UK-based pension funds have outsourced the management of their retirement assets. However, this accounts for only 4% of total assets of the country’s pension capital—a figure indicating that the fiduciary management industry has a ways to go before it attains dominance as a model.

Key highlights from the report include:

· “UK pension schemes most commonly engage in FM to reduce the governance burden that investment management places upon trustees.”

·  “The Implemented Consultancy practices dominate the UK FM market with a significant market share in terms of both number of mandates (c. 70%) and AUM (c. 60%).”

·  “UK FM market providers expect significant growth to emerge in this market over the forthcoming years—albeit there is significant variability in the expectation for this growth between the market providers.”

Regarding fees, KPMG said this:

·  “Fee structures under FM mandates are generally fixed or performance-related in nature. As part of this survey we explore the general consensus within the provider market as to which of these fee structures (if either) is preferable. A further consideration is the measure used to determine the outperformance that will attract performance fees under a performance-related fee arrangement – i.e. to ensure that clients are treated fairly, whilst providers are rewarded appropriately as experience develops.”

The rise of fiduciary management in the UK has been mirrored in the American market as of late—although the implemented consulting model has stiff competition from asset management groups (such as Goldman Sachs Asset Management) and more niche, established players such as Strategic Investment Group, Makena, and Investure.

The KPMG study surveyed 12 fiduciary managers at work in the UK.