Going Dutch: The Future of Fiduciary Management

Jul 7 2009 | 1:00am ET

By Nigel Birch -- Fiduciary management is a Dutch born model of pension management and somewhat of a misnomer with the exact definition a hotly contested point. Fiduciary management should be viewed as an umbrella term for an investment model involving the outsourcing of the design, implementation and oversight of a pension fund’s investment program to one single provider, the fiduciary manager.

Figure 1

In recent years the model has seen tremendous growth inside the Dutch market where fiduciary managers now managed over $400 billion (€300 billion) of institutional money.

One can attribute this growth to the rapidly evolving regulatory environment and increasing diversity and complexity of capital markets. This, coupled with asset liability management, risk management, accounting and performance measurement becoming more professionalized is leading to pension managers questioning whether they have the skills and resources to perform adequate due diligence and risk management, while at the same time achieving the higher returns required to meet spiraling pension liabilities.

This growth has not gone unnoticed, however, and with a fixed volume client base, competition in the Netherlands is fierce. Fiduciary managers are reportedly slashing margins to gain market share. An obvious solution to this plateau would be to expand into new markets, and this is exactly what has happened. European markets with developed pension systems such as the UK, Germany, Italy and Switzerland are firmly in the sites of global players such as SEI, Goldman Sachs, Blackrock and the larger Dutch contingents such as Mn Services, APG Cordares and Cardano. Mandates have been won for funds as large as Asda in the UK, Henkel in Germany and Pens Plan in Italy. A recent poll conducted by SEI found 61.3% of UK Pensions would consider outsourcing the management of their assets to a fiduciary manager.

Figure 2 : Geographical Distribution Of Asset Managers (%, 2008)

As figure 2 describes, the growth of this model has seen Dutch asset managers significantly increasing their market share of their home market, predominantly at the expense of the U.S. and UK. 

With the Dutch market becoming saturated and the jury still out on the acceptance of the model in wider European markets, the future of the model is far from certain. This uncertainty has significant implications on traditional asset managers and hedge funds internationally.

A current research study focused on this area is being compiled by market intelligence firm Spence Johnson and focuses on the ideas and innovations of fiduciary managers and institutional investors, calculating possible futures of the market and the effects it will have on asset managers.

Acceptance and further growth of the model would result in asset managers no longer selling to Joe the Pension Manager but, Joe the Fiduciary manager—a very different breed of professional whose colleagues at the same firm are, more often than not, offering competing products. Understanding the needs, wants and mindset of these managers will become more and more crucial for hedge funds and traditional asset managers when looking at attracting institutional money.

Nigel Birch is a consultant at Spence Johnson Ltd., a specialist provider of marketing intelligence. The firm’s research products and consulting assignments support marketing, sales, and strategic planners across the international investment business, including asset management, life & pensions and wealth management.


In Depth

Fitch Says Alternative Asset Managers 'Stable' Despite Dry Powder

Nov 20 2014 | 9:30am ET

Ratings agency Fitch says the outlook for seven publicly traded alternative asset...

Lifestyle

Cohen Buys $101 Million Sculpture

Nov 12 2014 | 9:17am ET

Steven Cohen was the sole bidder for a rare Alberto Giacometti sculpture at Sotheby...

Guest Contributor

Why The Big Money Is Going To Europe

Nov 14 2014 | 6:03am ET

Peer-to-peer lending was invented with the individual investor in mind. But despite...

 

Sponsored Content

    For Hedge Funds, Mastering Data Is Key To Success

    Nov 4 2014 | 9:45am ET

    Data management is important to every business, but for hedge funds, it is critical. FINalternatives recently asked Peter Sanchez, CEO of Northern Trust Hedge Fund Services, how fund managers can deal with the demands of managing data while at the same time remain transparent and abide by operational best practices. Read more…

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

November 2014 Cover

Building a better market

Reg NMS created a huge bifurcation in equity markets and while much of what has followed has been positive, in terms of lower fees and greater liquidity, many traders would like to see the market come...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.