XPS reveals improvement in fiduciary manager performance in 2019

UK pension funds with outsourced fiduciary management experienced a wide range of performance outcomes in 2019 despite buoyant market conditions, according to a report on Fiduciary Manager (FM) performance published today by XPS Pensions Group.

The second annual XPS FM Watch compares the growth portfolio performance of over 99% of the FM market.  It reveals a 12% difference between the best and worst performing FMs in 2019, with over a third of FMs underperforming the average Diversified Growth Fund performance for the year.  Looking at FM performance over three years to the end of 2019, the difference between best and worst rises to 20%.

The report, which analyses the performance of FMs with collective responsibility for pension fund assets of over £190 billion, also reveals markedly different asset allocation strategies across the FM market, with the strongest performers typically favouring higher equity allocations in 2019.

Commenting on the findings in the report, 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.”

A quarterly update of XPS FM Watch will be published later this month, showing how the COVID-19 pandemic has impacted FM performance.

For a copy of the annual report and accompanying video, please see here