Fiduciary Manager Review 2024

Fiduciary Manager Review 2024

01 May 2024

An analysis of 20 UK Fiduciary Management growth portfolios

Following large changes to the investment landscape for defined benefit pension schemes in recent years, many schemes are hitting the final stretches of their race towards their full funding objectives. Many of these pension schemes will also have growth portfolios playing a key role within their strategy to help them in this period.

Bearing the scars of a tough year in 2022, for which it was likely growth portfolios had experienced significant absolute negative returns, many fiduciary managers (‘FM’) faced a difficult task jostling to position portfolios in the midst of a high inflation environment and with expectations of a global recession whilst also still adjusting the asset allocations of portfolios post the gilts liquidity crisis.

In 2022 those with higher allocations to illiquid assets and higher complexity provided protection against large negative returns. However, in 2023 there was a very different market backdrop.

Covering more than 90% of the UK fiduciary management market, this survey analyses 20 growth portfolios managed by 17 FMs over 2023 and assesses which fiduciary management solutions delivered the strongest investment performance.

Download the Report

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What are the key findings of this Fiduciary Management growth portfolio study?

Our analysis has identified some key points and observations amongst all growth portfolios.

• All FM growth portfolios provided positive absolute returns in 2023, though there was a wide range (12.9%) between the highest and lowest portfolio returns.
• There was a strong link between relatively high levels of illiquidity and lower absolute returns.
• The majority of FM growth portfolios underperformed their stated target returns with some portfolios underperforming by 3% or more.
• The majority of FM growth portfolios outperformed diversified growth funds (‘DGFs’) on a risk-adjusted basis over the 1 and 3-year periods to 31 December 2023.
• For higher returning portfolios, exposure to equities and credit made up significant proportions of overall returns. However, some FMs provided significant negative returns due to equity hedging and downside protection strategies.
• Five FM growth portfolios underperformed the DGF lower quartile for 2023
• Across FM portfolios, there was a mixed outcome as to whether manager selection and tactical asset allocation added value.
• There is a large range of currency exposures across FM growth portfolios. There is a potential for volatile returns for those managers with significant unhedged currency exposures.

For more information and trustee action recommendations, download our full Fiduciary Manager Review 2024 PDF, where we outline the key findings from the analysis in more detail.

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Important information: Please note the opinions expressed herein do not take into account the circumstances of investors and accordingly may not be suitable for your fund. The information expressed is provided in good faith and has been prepared using sources considered to be reasonable and appropriate. While information from third parties is believed to be reliable, no representations, guarantees or warranties are made as to the accuracy of information presented, and no responsibility or liability can be accepted for any error, omission or inaccuracy in respect of this. This webpage may also include our views and expectations, which cannot be taken as fact. The value of investments and the income from them can go down as well as up as a result of market and currency fluctuations and investors may not get back the amount invested. Past performance is not necessarily a guide to future returns. The views set out in this webpage are intentionally broad market views and are not intended to constitute investment advice as they do not take into account any client’s particular circumstances.

Please note that all material produced by XPS Investments is directed at, and intended solely for the consideration of, professional clients within the meaning of the Financial Services and Markets Act 2000 (FSMA). Retail or other clients must not place any reliance upon the contents.