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What is Fiduciary Management?
Fiduciary Management is an approach to defined benefit pension fund management which involves appointing one company to provide both investment advice and implementation. This is different to the traditional model of pension fund management where a pension fund has to engage and manage multiple advisers and asset managers.
The approach is designed to achieve the long term goals of a pension fund by providing day-to-day investment management and advisory services as well as the ability to integrate pension finance with company finance. In practice this means that trustees can delegate the day-to-day management of the pension fund to the Fiduciary Manager, who is accountable to the trustees for the performance of the fund.
The approach can address challenges within the pension’s landscape because of its enhanced use of the governance budget, the ability to integrate pension finance with company finance and the implementation of a Manager of Managers investment process. The use of a Manager of managers investment process is designed to improve the risk return profile of the pension scheme and to provide significant time savings because all manager selection and replacement decisions are undertaken by the Fiduciary Manager. In this way the trustees retain their authority, make the strategic decisions and delegate the work best done by investment professionals to the Fiduciary Manager.
Fiduciary Management is well established in the US (Pension Outsourcing) and the Netherlands, and is growing in popularility accross the UK market.
What are the benefits of working with a Fiduciary Manager?
For Trustees:
- One point of contact rather than multiple advisers and asset managers
- Time savings allowing increased focus by trustees on strategic issues
- Potential cost savings by working with one provider on an asset based fee
- Single focus on overall goals of the pension scheme by combining advice and implementation
- The comfort of a co-fiduciary who is accountable for manager selection decisions
- Diversification within asset classes
- Continuous manager research, monitoring and replacement
- Link between pension finance and company finance enhancing communication with the company sponsor
For Company Sponsors:
- Access to a corporate finance and pension finance integration process to demonstrate impact of pension fund on corporate finances in multiple scenarios
- Transparency to enhance communication between trustees and company in discussing employer covenant
- Comfort of a co-fiduciary working as a partner with the Trustee Body
- Confidence that the pension scheme is managed by experts sharing and relieving the burden of governance from trustees
Examples of Fiduciary Management Firms:
SEI Investments [1]
