Fiduciary managers experienced a wide range of returns in their growth portfolios in 2022, with the highest-performing funds outperforming the worst by 13 per cent, according to research from XPS Pensions Group.
The pattern of concurrent losses in both fixed income and equities that was observed throughout 2022 had a substantial influence on the portfolios of fiduciary managers, reversing the recent trend of robust equity performance.
The study did find, however, that fiduciary managers with more illiquid assets had better year-round performance, with greater net returns and less volatility.
These strategies might have encountered more severe liquidity issues, which would have made it harder for them to keep up the amount of liability hedging.
The report also emphasised that the success of maintaining the liability hedge level during the October 2022 gilts crisis will affect the combined performance of schemes.
Due to fiduciary managers’ difficulties in meeting collateral calls, the level of hedging may have decreased, leaving pension plans vulnerable to uninsured losses and haircuts on sold assets.
Fiduciary managers nevertheless beat the annualised median returns of Diversified Growth Funds despite the difficult market conditions, with only five of the 18 funds falling short of this benchmark.
More than 50 per cent of the funds under consideration outperformed the top quartile of all returns for Diversified Growth Funds.
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