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Lack of competition despite growth for fiduciary management, says KPMG

06 November 2014

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The UK fiduciary management market has seen mandates almost double year-on-year, according to latest figures from KPMG.

The company's annual report into the UK fiduciary management market found that mandates have increased 47% year-on-year, with the total assets under management up by 23% to GBP 72bn since 2013.

Anthony Webb, head of fiduciary management research, investment advisory at KPMG, said he believes there is room for further growth.

"These results show that the FM market continues to grow but this was primarily driven by new market entrants, which highlights that the market is not yet fully mature," he said.

The report also revealed that the full delegation market grew to GBP 38bn in assets under management, representing more than 30% year on year growth since 2007.

KPMG says this has primarily been driven by small schemes, with 77% of new mandates in 2014 falling in the under GBP 100m category.

Fully delegated mandates are now used by 5% of UK defined benefit schemes, representing 3.4% of the UK's defined benefit assets.

The partial delegation market also saw a 52% boost in partial delegation mandates in the past year, the report found.

Despite its success, the industry faces challenges around performance measurement and competition, with 81% of new mandates won without a tender process or without an additional fiduciary manager providing a fee quote.

"One area in which the industry continues to lag is performance measurement," said Anthony Webb.

"While it is relatively easy to establish the performance of an asset manager, the data to compare the performance between fiduciary managers- or to assess the impact of fiduciary managers as a whole – is more difficult to assess."

However, with significant numbers of schemes managed by fiduciary managers about to reach their three-year anniversaries, this looks set to change.

Performance reviews are likely to take place in line with triennial valuations, with 2014 seeing the first schemes switching providers.

Currently just 3% of schemes are switching providers, but providers questioned in the KPMG survey predict this figure will rise significantly by 2017.

Anthony Webb said: "Most fiduciary managers have now built up a performance track record of several years so individual schemes can request performance data from their provider and determine whether or not they are achieving their objectives."

However, he added that there is "no consensus" on how to combine the performance across all of a provider's mandates to enable a comparison of the added value of one fiduciary manager to another.

First published - 06.11.2014

Lindsay.sharman@wilmington.co.uk