The Pensions Trust has implemented a new investment service across all its schemes to allow for the generation of better risk-adjusted returns relative to liabilities.
The new strategy will see the Pension Trust, a multi-employer pension fund for the third sector, continue to invest more of the underlying schemes’ assets in alternative growth assets that target other risk types, and which do not always outperform or underperform in equities at the same time.
The strategy will also strive to ensure the Pensions Trust’s 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.
There will also be a 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 of the Pensions Trust, said: “With funding and solvency levels significantly below 100%, 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.”
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