Fiduciary mandates escape external scrutiny – KPMG survey

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According to KPMG’s annual Fiduciary Management Survey, 87% of pension schemes do not use an independent provider to monitor the performance of their fiduciary mandates – exactly the same as a year ago.

Fiduciary management, in which an institutional investor appoints a third party – typically an investment consultant – to manage either part or all of its assets, was the subject of specific scrutiny in the interim findings of the Financial Conduct Authority’s market study, published on November 18.

The regulator said “clearer disclosure” was required of fiduciary managers’ management fees and performance, and it also flagged concerns about the transparency of the fiduciary mandate tender process.

The KPMG survey found that consultants continued to manage the majority of fiduciary mandates, compared with investment managers and specialist providers. However, the consultancy did find that independent third parties advised on a third of mandates awarded by investors over the 12 months to June 30 – up on 23% a year ago.

Total assets under fiduciary management continued to grow strongly, rising 23% to £123 billion, compared with £100 billion at the time of the 2015 survey. The total number of fiduciary mandates awarded in the UK also rose, around 18%, to 719.

KPMG said most fiduciary managers used equities to drive investment returns, with almost all of those responding to the survey advocating a high level of interest rate and inflation hedging.

As part of its study into the asset management sector in the UK, the FCA said fiduciary management fees were around three times higher on average compared with normal consultancy work.

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