UK - More pension schemes will appoint overseers to scrutinise investment decisions made by external asset managers as part of a burgeoning trend towards fiduciary management, according to Nigel Birch, director of consultants Spence Johnson.

His comments follow the announcement yesterday that the £3.3bn (€3.7bn) Merchant Navy Officers’ Pension Fund (MNOPF) had hired Hymans Robertson to monitor investment decisions made by Towers Watson.

Birch, whose firm recently published a report into the threat posed by traditional asset management businesses from fiduciary managers, said smaller schemes would likely adopt the same model, hiring smaller overseers - such as independent trustees - to do the job.

“The fact that the Merchant Navy scheme has gone with a high-profile consultant is simply a reflection of the size of the fund,” he said.

In its survey of 29 fiduciary managers, Spence Johnson claims last year saw the largest number of fiduciary management appointments across Europe to date. The sample polled represents 517 institutional investors with €761bn in assets under management.

In some cases, said Birch, fiduciary managers were taking on institutional assets, offering lower fees and - at least for pension schemes - better lock-in terms.

Asked whether pressure on traditional asset managers in fact worked to pension funds’ advantage, he said: “Those who’ve adopted fiduciary management - such as the Habitat corporate pension scheme and the Merchant Navy scheme - speak well of it. Those who offer it talk up investment performance, but the model has only been around for a couple of years and that’s too short a time to provide meaningful data.”

Whether fiduciary management poses a significant threat to asset managers depends on their business model, said Birch, pointing out that some businesses, such as Dutch asset manager PGGM, was in fact an extension of the €99.5bn PFZW healthcare pension scheme.

In the meantime, at least in the UK, the trend towards fiduciary management sees no sign of waning. In other European countries, notably the Netherlands, fiduciary managers make up 80% of the market.

“Look at who’s driving the market. It’s asset managers, consultants, and new people such as Mn Services and PSolve. With that kind of influence, I’d be surprised if the market didn’t grow,” said Birch.

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