Fiduciary management is a solution which enables pension scheme trustees to execute their long term strategies efficiently and target better outcomes through a more effective governance structure.
It is very much a bespoke solution rather than a product, with a scheme-specific benchmark and portfolio. Fiduciary management provides the ability to react quickly to changes in market conditions and capture opportunities, without the need to wait for quarterly trustee meetings or trustee education.
For many trustee boards, fiduciary management is about having access to a level of expertise that can otherwise be missing on a day-to-day basis. It involves experts who understand the complexity of investment markets and the needs of trustees, and can help them achieve their objectives of closing scheme deficits and meeting their liabilities.
Fiduciary managers are aligned with clients' interests and directly accountable for results. This is because they take clear responsibility for investment decisions on behalf of trustees, and manage assets relative to liabilities within a clear performance measurement framework. Typically the fiduciary manager will appoint multiple underlying specialist fund managers on the trustees' behalf to manage each section of the investment portfolio.
Full fiduciary management: trustees set the overall strategy (including the long term risk and return objectives) and then delegate all investment decisions and day-to-day running of the portfolio to their fiduciary manager. The provider manages all of the scheme's assets with a bespoke liability benchmark.
Partial fiduciary management: trustees delegate all investment decisions for only a specific section of their portfolio (for example, hedge funds, emerging markets, alternatives or liability hedging assets). The trustees maintain the decision making on the remainder of the portfolio.
Strategic de-risking mandate: trustees ask the fiduciary manager to implement their de-risking flight plan that forms part of their ongoing strategic benchmark. This is often based on funding level or market based triggers.
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Aon Hewitt Limited is authorised and regulated by the Financial Conduct Authority.