Why fiduciary management should always be made to measure

  • Sion Cole

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or financial product or to adopt any investment strategy. The opinions expressed from BlackRock are as of December 2020 and may change as subsequent conditions vary.

At BlackRock, we know that every pension scheme has its own set of unique circumstances and that many of the portfolios from the past won’t deliver the results many are looking for today. Instead, we build a tailored solution from the ground up.

In 2019, as political and economic headwinds grew, we reviewed portfolios and positioned them more defensively which helped protect our clients against falls in funding early in 2020. In March, we re-risked portfolios, adding to equity allocations for clients, and then locked in profits in April. By late April, we had re-risked again, moving between 2 per cent and 8 per cent of portfolios into growth assets, focussing on investment-grade and high-yield credit.

All in all, by the end of September, our asset-allocation decision had added an average of 0.6 per cent to funding levels.

A testing time

 And although we’ve been working remotely, in many ways, the Covid-19 pandemic has brought us closer to our clients. We’ve maintained regular communication with them through periods of exceptional volatility, while the experience of seeing people in their ‘natural habitat’ has forged deeper relationships.

Our clients tell us they feel more in control of their journey having adopted fiduciary management. This is due in part to our tailored approach and team of experts navigating ever-changing market dynamics

As we move into 2021 we see that the need for many schemes are changing so it is incumbent on us to continue working with each Trustee Board to consider their position and build a tailored solution where they are considering a Fiduciary Management solution. And the result looks different every time. For example, it could include an allocation to a customised alternatives fund for clients concerned with environmental, social and governance (ESG) factors, or a tailored cashflow-driven investment portfolio matching specific cashflow requirements.

Busier than ever

Periods such as the past few months highlight the importance of expertise, which is partly why the number of Requests for Proposal (RFPs) to BlackRock have gone up 240 per cent in 2020. More schemes than ever seem to be looking for fiduciary management to streamline the governance process.

Going forward, we believe that while we can’t remove risk altogether, our approach can help clients to manage it and continue to construct portfolios in line with their own circumstances and requirements.

As the world grapples with the challenge of vaccinating its population against Covid-19 and re-engages with other global issues, from climate change to international tensions, 2021 seems likely to bring more upheaval. And BlackRock’s Fiduciary Management stands ready to help clients weather the storm.