On the go: New research has revealed the stark differences between best-in-class and stragglers in the fiduciary management market.
UK pension funds with outsourced fiduciary management experienced a difference in performance of up to 12 per cent in 2019, according to research from XPS Pensions Group.
The second annual XPS FM Watch, published on Monday, which compared the growth portfolio performance of more than 99 per cent of the FM market in charge of assets in excess of £190bn, found that more than a third of FMs underperformed the average diversified growth fund performance for the year.
Looking at the managers’ performance over three years to the end of 2019, the difference between best and worst rises to 20 per cent, XPS stated.
The report also showed markedly different asset-allocation strategies across the FM market, with the strongest performers typically favouring higher equity allocations in 2019.
André Kerr, head of fiduciary oversight at XPS Pensions Group, said: “While the risk profile of the investment strategies used by the strongest performers won’t suit every scheme, we would have expected all FMs to have outperformed the average diversified growth fund given the favourable market conditions of 2019.
“Covid-19 represents the first major test for FMs, as most did not provide a UK offering during the global financial crisis of 2008-09. In order for schemes to benefit over the long term from strong performance of their FM during 2019, their portfolios also need to be resilient to downside shocks to financial markets.”
