Choosing to adopt Fiduciary Management or an Outsourced Chief Investment Officer ("OCIO") model is a big decision for pension schemes and is not for everyone - we help you decide if it is right for you. As well as regularly meeting with managers and other industry participants to ensure our clients are receiving excellent service, we provide:
- A full oversight service.
- Impartial and specialist investment advice.
- An internal network to call on the necessary expertise if required.
Decide on investment implementation model
- We get to know you and your investment beliefs. We couple this knowledge with our strategy and governance expertise to advise you on what approach is appropriate for you.
- Our offering includes interactive training sessions, one on one training, and in-depth reviews.
Choose suitable providers
- There are an increasing number of fiduciary managers and solutions, we help you select the one that meets your specific needs.
- Our selection process is underpinned by our proprietary SCORE research process which recognises the market is relatively young and still differentiated.
- We engage at a level that is suited to you, whether it is providing a short list of recommendations all the way through to arranging beauty parades and site visits.
Transition to new arrangement
- Moving to a new fiduciary arrangement or OCIO provider can be an overwhelming process. Our team has a strong track record of helping clients transition from one arrangement to another, be it reviewing contractual agreements to negotiating fees to ensure you get the most value for money.
- Our aim is to make what can be a stressful period for trustees, easier to navigate.
Monitor providers
- We feel strongly that your fiduciary arrangement should be independently reviewed on a regular basis to ensure transparency around performance and fees. We check if your manager is performing in line with their mandate and provide insight into the whole market to help you benchmark your arrangements.
- Importantly, we also consider if your fiduciary arrangement continues to fit with your overall pensions strategy.
Ad-hoc queries
- We have the expertise and network to advise you on investment issue you encounter.
- We work closely with our pensions, sponsor covenant, legal and insurance teams to provide a comprehensive service.
Fiduciary management and OCIO explained
- What is fiduciary management?
- History of fiduciary management
- Why do trustees choose fiduciary management?
- What are the challenges associated with fiduciary management?
- Is fiduciary management right for your pension scheme?
- What is OCIO?
What is fiduciary management?
Fiduciary management involves the delegation of some, or all, of the day-to-day investment decision-making and implementation. Importantly, the Trustees always retain responsibility for deciding high level investment strategy, i.e. risk and return targets.
Fiduciary arrangements can be highly customized: this chart provides some examples with the grey areas relating to where the Trustees retain investment decision making.
History of fiduciary management
The first UK mandate was implemented in the early 2000s - since then the number of fiduciary mandates and providers has grown significantly. The total UK fiduciary assets now exceed £100bn.
Why do trustees choose fiduciary management?
- Focus on high level strategic decisions
- Manage decision paralysis
- Implement ideas more quickly
- Access wider range of asset classes
- Achieve better manager fees through economies of scale
What are the challenges associated with fiduciary management?
- Potential conflicts of interest
- Difficult to assess value
- Fee transparency
- Traditional performance comparison difficult
- Exit costs can be high
Is fiduciary management right for your pension scheme?
Consider the following questions:
- Are you spending your time in an optimal and effective way?
- Are you receiving value for money from your current arrangements?
- Do you have the right level of investment expertise?
If you answer no to any of these questions (or are unsure) then you should consider if there is a different investment and governance model that could work better for you.
What is OCIO?
OCIO seeks deliver the efficiencies of the fiduciary management model but with greater investment control. This is achieved by have a strategic adviser responsible for working with stakeholders to agree key strategy parameters such as required return, risk budget, de-risking trigger. The OCIO then takes responsibility for managing the portfolio in such a way that it aligns with the key strategy parameters.
Could larger schemes be missing opportunities to optimise their investment model?
It’s hard to ignore the growing trend amongst pension schemes to appoint a single provider to implement investment strategy across all their assets.
The size of the “whole of scheme” pension asset outsourcing market is over £200bn. I expect we will reach the £300bn mark within the next couple of years. Could larger schemes be missing opportunities to optimise their investment model?
Introducing PwC's FM / OCIO platform
The role of investment oversight is now about strategy and getting the best out of a few managers. PwC's FM / OCIO platform has been designed to allow you to easily access objective analysis and research on these managers.
One of our strong beliefs is (and has always been) ongoing monitoring of your outsourced investment manager is as important as selecting the right manager. This is a view which is supported by the Pensions Regulator, whose guidance increasingly makes clear it is best practice for trustees to objectively review performance and ongoing suitability of fiduciary managers / outsourced chief investment officers.
PwC's FM / OCIO platform is designed to ensure trustees have up to date access to our views on their fiduciary manager / OCIO. We recognise that the approach to ongoing monitoring should be tailored and proportional to the requirements of each scheme. As a result, we have designed the platform to have modules thereby allowing for this tailoring.
Highlights of the platform include:
- Ability to check if your scheme funding level has been changing as expected
- Objective benchmarking of performance against market peers and other relevant comparators
- Real time alerts of key changes with your manager
PwC's FM / OCIO platform integrates PwC’s artificial intelligence (AI) capabilities with investment research thereby allows for cost effective and robust oversight.
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