Issued on: 7 January 2011
The Pensions Trust, the leading multi-employer occupational pension fund in the UK for the Third Sector, today announces details of its new investment service across all schemes. The new approach aims to allow for the generation of better risk adjusted returns relative to liabilities to ensure that the optimum results are delivered for members.
The key elements of the new strategy are:
Due to the need to diversify growth type assets away from investment in just quoted equities, The Pensions Trust plans to continue to invest more of the underlying schemes’ assets in alternative growth assets that target other risk types, and which don’t always outperform or underperform equities at the same time. This process has already begun and sees growth assets split into three categories: quoted equities, alternative liquid growth and alternative illiquid growth.
Striving to ensure that its investment manager appointments add value by outperforming their respective benchmarks, whilst recognising that where markets are more efficient, passive index-tracking investment may be a better option.
More concentrated focus on the management of asset-liability outcomes rather than managing the assets in isolation. This includes the execution of a common interest rate and inflation risk hedging policy that is appropriate for each (defined benefit) scheme.
The Pensions Trust has also made changes to its governance structure to ensure the right support in the investment decision making process through the creation of three sub-committees that support the main Investment Committee:
The Funding and Investment Strategy Review Group (FISRG) which will be responsible for agreeing funding conclusions with scheme sponsors within guidelines set by the Board or to refer them to the Investment Committee for further adjudication. It is also responsible for recommending scheme-specific investment strategies to the Investment Committee.
The Investment Strategic Opportunities Group (ISOG), which consists of a subset of the Investment Committee supported by Trust Officers. Its role is to review, recommend or reject new investment ideas before they appear in front of the Investment Committee.
The Investment Manager Review Group (IMRG), which monitors the performance of managers and other providers and makes recommendations about which of those it has concerns with to the Investment Committee prior to any decision to review or terminate an appointment.
David Adkins, Chief Investment Officer said: ‘’With funding and solvency levels significantly below 100 per cent, and with future return expectations having dwindled as interest rates and market sentiment have fallen, the new strategy aims to allow for the generation of better risk adjusted returns relative to liabilities for pension schemes. In addition, our new investment governance structure, which has been in place in its entirety for less than a year, I feel is better equipped to produce better risk adjusted returns compared to the past.
“In addition, we are also providing sponsoring employers and our pensions committees with more extensive reporting, covering information about asset-liability risks, and including more information about The Pensions Trust’s capital market views as well as other matters which are influencing our investment decisions. Going forward, we will also be taking a more responsive approach to fluctuations in market conditions through the procurement of a service which will provide daily estimates of funding and solvency levels. This will also enable us to provide more in-depth performance reports.
Stephen Nichols, Chief Executive of The Pensions Trust said: “Through our extensive review of our investment strategy, and using David’s vast expertise in Investment and Actuarial Consulting, I feel these changes will help drive our commitment to offer the best possible investment expertise for our members. At The Pensions Trust, it is of the utmost importance to us to ensure that as an organisation we are able to offer funding and investment solutions of the highest calibre to our members.”
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