Charles Stanley can trace its origins back to the 18th century, but its fiduciary manager award reflects very 21st century qualities. Its portfolio construction techniques enable the firm to manage defined benefit (DB) pension schemes’ total portfolio of assets in a flexible, bespoke manner.

“We start from the assumption that every pension scheme is unique and design a service that suits each client,” explains Charles Stanley CEO Paul Abberley. “Some of our clients are focused on hedging their liabilities. Some of our clients have clear long-term goals. Some have a strong appetite for investment risk. Some need regular access to up-to-minute investment data. But some don’t want any of these things. There is no one size that fits all, which is why our clients value our bespoke service.”

All elements of Charles Stanley’s fiduciary services are bespoke and can include asset-liability modelling, value-at-risk calculations, bond-based liability-driven investments and dynamically-managed growth portfolios.

The bespoke element is critical. “We listen to our clients’ needs and spend time to understand their circumstances and ambitions before we propose a specific course of action. This allows us to build bespoke strategies and portfolios that suit each client. Our clients place significant value on the on-going support they receive from our investment experts, because getting the plan right is just as important as the execution,” says Abberley.

Charles Stanley invests clients in best-in-class passive funds; it is an active asset allocator but passive stock picker. The attraction of this approach is simple, says Abberley: “Index-tracking funds are so numerous, effective and easy to access that for most clients they are the most efficient way of building and managing a globally diversified portfolio. They help to keep costs down and to focus the investment process on what matters most – asset allocation.”

But, he acknowledges, they do not suit everyone. If this is the case, Charles Stanley’s collective funds research team can provide research into actively-managed funds.

Fiduciary management remains a small part of the overall DB pension scheme market, which means the potential for growth is huge. “There have never been so many options available to trustees of DB pension schemes – particularly smaller schemes – and fiduciary management is leading the way in terms of innovation,” says Abberley.

According to a KPMG survey from 2015, the size of the UK fiduciary management market has grown more than the most optimistic manager would have expected, now exceeding £100bn. It also noted an increase in the number of larger schemes awarding mandates for a portion of their assets.

In Abberley’s view, the most effective fiduciary mandate covers the entirety of a pension scheme’s assets. This allows the manager to provide detailed asset-liability risk analysis and monitor risk on a daily basis. However, this doesn’t mean that legacy or cherished holdings have to be discarded.

“The bespoke nature of our portfolios can allow certain historic assets and funds to remain unchanged provided they fit within the overall strategy agreed with the client, no matter how large or small the scheme,” he says.

Challenges remain for the sector as measuring performance continues to be difficult for trustees, as Abberley acknowledges. “Performance is by its nature difficult to compare due to different investment approaches taken within the industry. We have adopted a robust performance measurement process that allow our clients to review performance in a variety of ways.”

This allows clients to monitor the progress of the overall strategy as well as the effectiveness of the Charles Stanley investment team.

“The biggest challenge for the industry is to help pension scheme trustees to realise that by appointing a professional investment team to manage their whole portfolio they gain control rather than lose it,” says Abberley. “Trustees spend an awful lot of time struggling to juggle all the different, complex elements of scheme’s portfolio when what really matters it getting the strategy right – and making sure it is stuck to.”