Fiduciary managers largely beat targets in 2025, but risk aversion may be limiting long-term value, according to research by consultancy Barnett Waddingham.
A broadly positive market environment supported fiduciary manager performance across the board, but a defensive bias running through portfolios meant schemes may not have fully benefited from three consecutive years of favourable markets.
The firm’s sixth annual Fiduciary Management Investment Performance Review covers the year to 31 December 2025 and draws on data from over £70bn of assets under management.
Global equity markets rose around 75 per cent over the period, with only a ‘small fraction’ of this captured by providers.
The report also uncovers that schemes targeting higher returns fared less well. On average, higher-return mandates outperformed their lower-return counterparts in just one of the past four calendar years, with weak private market returns and lower allocations to public equities among the contributing factors.
Over a rolling three-year period, consistent performance patterns are emerging, with some FM providers regularly appearing in the top or bottom half of the peer group, giving trustees a clearer basis on which to assess their provider.
More than half of schemes now use fiduciary manager providers that both design and implement liability hedging in-house. With liability hedging and associated risks now a larger part of de-risked portfolios, Barnett Waddingham says independent scrutiny of FM providers’ hedging arrangements needs to be strengthened in the market.
Peter Daniels, head of outsourced investment at Barnett Waddingham, says: “2025 was a good year for fiduciary management, and trustees should take some comfort from that.
“But our findings point to some important questions about long-term value and whether the industry’s cautious approach is fully serving schemes, particularly those with higher return ambitions. With performance trends now emerging and hedging carrying greater weight in overall outcomes, this feels like an important moment for trustees to take stock.”
The BW report also emphasised that returns cannot be considered in isolation, and must be viewed in the context of the liabilities being managed, the level of risk taken, and the design and implementation of liability hedging strategies.