Fiduciary Management Report 2023 Fiduciary Management Report 2023

Review highlights

A difficult year to outperform liabilities

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Fiduciary Management Investment Performance Review

3rd edition | 2022 in review

Section 01: Highlights

This survey focuses on the year ending December 2022 and includes data from c.£60bn of assets under management.

Performance driven by scheme-specifics

Wide dispersion in performance

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Section 02: Performance

A difficult year to outperform liabilities

Almost all providers saw negative relative performance over the year, with few managing to outperform liabilities on average. No FM had average performance which fell within their target range.

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Section 03: Authors

We would like to thank the organisations which took part in this year's review:

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Peter Daniels FIA

Partner & Head of FM Evaluation

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Chris Powell FIA CFA

Head of FM Research

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Kirsty Steven

Senior Investment Analyst

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Our experts

Highlights

Performance

Authors

Extra care is required when trying to compare investment returns, as performance was heavily reliant on individual scheme circumstances, with portfolio liquidity and hedging being key drivers. Trustees should ensure they are aware of, and comfortable with the level of illiquidity.

Most FM mandates have high hedge ratios, which means it was more difficult to outperform in a period in which most asset classes fell, despite liabilities falling in value. Under-hedged schemes typically fared better than those with higher levels of hedging, so the best case scenario was often to limit funding level falls.

As a result of scheme-specifics there was a significant dispersion in performance across mandate categories. This is also the case within some FMs themselves.

4% 2% 0% -2% -4% -6% -8% -10% -12% -14%

0.5% - 1.5%

1.5% - 2.5%

2.5% - 3.5%

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FM performance relative to liabilities over 2022

Target return above liabilities

Target 1st quartile 2nd quartile Median 3rd quartile 4th quartile

Aon BlackRock Cardano Charles Stanley Goldman Sachs Asset Management Mercer Russell Investments Schroders Solutions SECOR SEI Van Lanschot Kempen Willis Towers Watson

Be careful with data

Communication was key

Looking beyond performance

There are other aspects trustees need to watch out for: - environmental, social and governance (ESG) and sustainability offerings are fast moving, - reduced assets under management (AuM) is impacting FM fees, and - delegation itself is taking on new forms (e.g. Outsourced Chief Investment Officer (OCIO)).

GIPS® data has enabled better comparison across the industry, but there are limitations and caveats to be aware of which make comparisons harder in 2022. We strongly encourage FMs to obtain independent verification of their GIPS® data to increase its credibility and reliability.

Fiduciary management helped ease the governance burden for trustees from an operational perspective. However, the quality of client service and communication had a major impact on pension scheme experience over the year.

Target 1st quartile 2nd quartile Median 3rd quartile 4th quartile