What is fiduciary management?
Fiduciary management involves the delegation of some, or all, of the day-to-day investment decision-making and implementation. Importantly, the Trustees always retain responsibility for deciding high level investment strategy, i.e. risk and return targets.
Fiduciary arrangements can be highly customized: this chart provides some examples with the grey areas relating to where the Trustees retain investment decision making.
History of fiduciary management
The first UK mandate was implemented in the early 2000s - since then the number of fiduciary mandates and providers has grown significantly. The total UK fiduciary assets now exceed £100bn.
Why do trustees choose fiduciary management?
- Focus on high level strategic decisions
- Manage decision paralysis
- Implement ideas more quickly
- Access wider range of asset classes
- Achieve better manager fees through economies of scale
What are the challenges associated with fiduciary management?
- Potential conflicts of interest
- Difficult to assess value
- Fee transparency
- Traditional performance comparison difficult
- Exit costs can be high
Is fiduciary management right for your pension scheme?
Consider the following questions:
- Are you spending your time in an optimal and effective way?
- Are you receiving value for money from your current arrangements?
- Do you have the right level of investment expertise?
If you answer no to any of these questions (or are unsure) then you should consider if there is a different investment and governance model that could work better for you.