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Fiduciary management returns differ in "first major test"

/Return_on_investment_compasFiduciary managers, whose presence in the UK pension funds market has grown since the 2008 financial crisis, show a 10% differential in returns during “their first major test” amid the Covid-19 outbreak.

The highest return since the start of the year in a 16-strong sample of unnamed fiduciary managers was £10 million (€11.18 million), according to research by XPS Pensions Group.

This was the difference between the highest and lowest of the fiduciary managers and based on a £100 million investment at the start of he year.

In a special report called ‘FM Watch’, XPS analyses the performance of fiduciary managers that collectively have £190 billion of assets under management from scheme clients and shows that managers with the strongest gains had high equity allocations in 2019 - but they also sustained the biggest losses in 2020. Managers that made lower returns in 2019 tended to be better prepared for the volatility.

André Kerr, head of fiduciary oversight at XPS Pensions Group, described Covid-19 volatility as “the first big challenge” for many fiduciary managers.

“The industry was only in its infancy during the 2008 financial crisis and since then managers have enjoyed one of the strongest bull markets in history. While all managers suffered losses last quarter, these were most severe for bulls in the bull market.”

The primary question for pension schemes should be to understand how fiduciary managers evolved strategies funding positions progressed over a buoyant 2019, he said.

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