Case study: Many assets classes reduce pension fund risk for Towry

Towry focused on the diversification of asset classes when designing the investment strategy for its group personal pension (GPP) scheme. After switching its pension provider from Axa to Zurich in 2009, the financial advice firm was able to offer its own funds to scheme members. This means staff can access 85 funds offered on the Zurich platform and three independent funds, which are managed by Towry and are also available to its private clients.

Each of the Towry funds is made up of 18 asset classes to minimise the investor’s exposure to risk. These include equities, bonds, commercial property, precious metals and cash. Investments can also be made in emerging markets and overseas.

Richard Higginson, head of reward at Towry, says: “The key to having a large number of asset classes versus having five or six, which you get in a standard pension fund, is that you then can take the upside of classes performing well and spread your risk. If you have a fund 90% in UK equities and the UK stock market crashes, you †lose huge amounts of your pension fund, whereas if you have a much smaller amount in UK equities and loads of money in other asset classes, you win on the good years in the UK equity market, but are not so exposed to the risk of a downturn.”

The firm has created a default fund from its three independent funds. It also offers a lifestyle fund, plus a cautious or growth option, a balanced fund and an alternative lifestyle fund using all three approaches.

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