There was an improvement in over fiduciary manager performance in 2019, according to new research by XPS. However this report found more than a third of fiduciary managers underperformed when compared to the average diversified growth fund.
Despite buoyant market conditions in 2019, XPS found there was a wide range of outcomes for funds with outsourced fiduciary management, with a 12 per cent difference between the top and bottom performing FMs.
Over a three year period, to the end of 2019, there was a 20 per cent difference between the best and worst FM funds.
This data comes in the second annual XPS FM Watch, which compares the growth portfolio performance of over 99 per cent of the FM market. these funds collectively manage over £190 billion of pension assets.
This survey also shows there are markedly different asset allocation strategies across the market, with the strongest performers, not surprisingly favouring higher equity allocations in 2019.
XPS Pensions Group head of fiduciary oversight, André Kerr says: “While the risk profile of the investment strategies used by the strongest performers won’t suit every scheme, we would have expected all FMs to have outperformed the average diversified growth fund given the favourable market conditions of 2019.
“Covid-19 represents the first major test for fiduciary manager,, as most did not provide a UK offering during the global financial crisis of 2008/09.
“In order for schemes to benefit over the long term from strong performance of their FM during 2019, their portfolios also need to be resilient to downside shocks to financial markets.”
A quarterly update of XPS FM Watch will be published later this month, showing how the Covid-19 pandemic has impacted FM performance.
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