Best performing Fiduciary Managers of 2019 suffer biggest losses in 2020, according to XPS

Best performing Fiduciary Managers of 2019 suffer biggest losses in 2020, according to XPS

26 May 2020

Fiduciary managers (FMs) faced their first major test in the first quarter of 2020, with the outbreak of Covid-19 driving a 10% differential between the best and worst performers in the UK. This is one of the key findings from a special edition of FM Watch published by XPS Pension Group, examining  the pandemic’s impact on the FM market.

The report, which analyses the performance of FMs with responsibility for pension fund assets of over £190 billion, shows that those managers that made the strongest gains through high equity allocations in 2019 also sustained the biggest losses in 2020. Managers that made lower returns in 2019 tended to be better prepared for the market falls.

75% of FMs made changes to their portfolio in early 2020, both to take advantage of emerging opportunities and to defend against losses. Towards the end of March and early April, there was a divergence of views on economic outlook, with some managers looking to increase exposure to equities, while others acted more defensively and increased allocations to government bonds or cash.

Commenting on the report, André Kerr, Head of Fiduciary Oversight at XPS Pensions Group, said:

‘The market downturn was the first big challenge for the majority of FMs. The industry was only in its infancy during the 2008 financial crisis and since then managers have enjoyed one of the strongest bull markets in history. While all managers suffered losses last quarter, these were most severe for bulls in the bull market.

“As the initial shock of Covid-19’s arrival begins to subside, trustees at pension funds with an outsourced FM must understand what is driving strategic decisions and whether they align with their investment beliefs.”