One of the UK’s largest defined benefit (DB) schemes has appointed BlackRock to take control of if investments and advise on strategy taking the asset manager’s total fiduciary assets under management to GBP300 billion.
The GBP8 billion British Coal Pension Scheme (BCPS) decision to appoint BlackRock is the latest high-profile fiduciary management appointment this year, reinforcing a trend to outsourcing governance to third parties.
A spokesperson for the BCPS said: “The scheme has been maturing over many years, with a growing proportion of members now retired and drawing their pensions. That means the scheme needs to balance several things at once: paying pensions from investment income, keeping funding stable, and making sure assets continue to grow over the long term. The Trustees have decided that BlackRock is well placed to help manage all of these priorities together, in a joined-up way.”
This April, L&G’s Asset Management was appointed as fiduciary manager to the trustees of the Wellcome Trust Pension Plan and the Genome Research Limited Pension Plan, overseeing GBP800 million of assets. This followed Schroders Solutions snapping up a GBP2.97 billion fiduciary brief with the E.ON UK Group.
Anne-Marie Gillon, Principal Investment Consultant at Quantum Advisory, said: “The fiduciary management market continues to see steady appointment activity at the larger end, with recent growth in assets under management driven by larger schemes moving to fiduciary or outsourced CIO governance arrangements.”
Quantum Advisory research shows schemes with assets of more than GBP1 billion account for 4 per cent of total appointments but around two-thirds of assets under management. By contrast, the number of smaller mandates has declined over the past 12 months as smaller schemes increasingly move towards endgame risk transfer transactions.
However, Gillion noted that small schemes can still benefit from using fiduciary services.
“As more small and medium-sized schemes consider their endgame options, they need the same quality of investment oversight as larger schemes despite having less internal resource. A well-defined fiduciary management arrangement can help schemes meet their governance obligations and keep their strategy aligned with their long-term goals without complexity.”
The Quantum Advisory report also reveals trends in investment strategies that reflect the continued improved health of DB schemes funding positions.
Over a one-year period the allocation to matching assets increased moderately as did the number of mandates targeting a lower level of return.
The majority of mandates now target a 0.5 to 1.5 per cent target return above liabilities as schemes derisk portfolios as they consider a potential buyout with an insurer.
The research reveals the number or risk transfer transactions for fiduciary management mandates has increased in line with the broader DB market landscape.
