UK - Asset managers are predicting the recent turbulence in the financial markets could spark a growth of fiduciary management worth £300bn in UK pension fund assets by 2012.

Andrew Dyson, head of institutional business for EMEA at Blackrock Investment Management, has suggested the UK pensions market could up to see £300bn in assets adopt the fiduciary management route or the effective outsourcing of fund manager selection over the next few years, if the concept grows as quickly as it did in the Dutch pensions market.

Dyson is basing his estimates on the interest asset managers have seen from pension funds in a very short space of time and correlating this activity to the rapid development seen the Dutch market over the last five years.

"There has been low take-up so far, perhaps only reaching an estimated £2bn. But in the last two weeks, we have found ourselves in discussions with four different pension plans at different stages of selection of a fiduciary appointment," said Dyson.

"These are people who have though about the issues so this is not a sudden whim. But the events of the markets over the last six weeks have accelerated their thinking and put them on the path of making these changes. We know from talking to these clients there is a lot more interest now. As the dust settles on this horrendous period, there will be more and more plans thinking ‘what we should be doing with our plans?'" he added.

Dyson argues his assessment is not mere speculation as data indicates approximately one-sixth or €100bn of pension fund assets in the Netherlands are now managed on a fiduciary basis, and this has quickly grown since 2003 when Goldman Sachs Asset Management won the first fiduciary mandate for the €1bn VGZ fund.

Leen Meijaard, head of institutional business for CEMEA at Blackrock, said there are thought to have been 25-30 fiduciary mandate deals signed by major pension funds in the Netherlands over the last few years, and at least €50-100m in fiduciary mandates is expected to be presented to the market over the next few years.

A recent survey conducted by the pensions regulator De Nederlandsche Bank (DNB) suggests 60% of Dutch pension funds have already appointed a fiduciary manager or were looking to do so.

The trend in the Netherlands has been more among corporate pension funds who have found they were less able to manage their dynamic asset allocation and manager selection in-house as the need for diversified asset allocation has expanded, suggested Meijaard.

But it is also a concept which is expected to be adopted by German pension funds most prominently over the coming years, and there is the prospect of fiduciary management growth among Scandinavian and Swiss pension schemes, according to Blackrock.

Equally as important, Blackrock is predicting the UK's fiduciary shift - whatever the label it is given - may opt to outsource only selected parts of the pension fund management so in-house officials can focus on what they consider to be their priority focus.

While schemes like Philips Netherlands operate on a full fiduciary basis - the Philips Pension Management company was bought by Blackrock MLIM in 2003 - what UK schemes may choose to do is select a fiduciary manager on a partial basis, as Cumbria County Council pension fund did when it appointed Blackrock to look after the overall structure of its portfolio and risk management, as well as the selection of alternative investment managers.

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