James Monk: Flexibility and scale to deliver good outcomes

Fidelity can help members 'future proof' their retirement says James Monk, investment director workplace investing Fidelity International

Fidelity’s new FutureWise strategy combines a simplified investor journey with a future-proofed and sophisticated investment approach. This means we can offer pension scheme members, and their
employers, the potential for highly effective retirement planning. 

In just nine months, we’ve transitioned our entire default membership across to the new FutureWise Target Date Funds (TDFs), where we expect to surpass the £10bn mark in assets under management early next year, with an incredibly strong pipeline of committed assets through 2024. The new strategy is gaining massive traction with both new and existing clients, who acknowledge its improved value and expected member outcomes. 

Simplifying our strategy around the member objective

A big strength of the approach is its simplicity, flexibility and transparency for members. When a member joins a scheme, they are placed in the Target Date Fund that best suits their selected retirement age. The strategy aims to maximise expected pots at retirement by maintaining exposure to growth assets and taking risk where the member can afford to, particularly when far from retirement. 

It then uses dynamic de-risking as retirement gets closer. The modelling we have done over the past 20 years suggests that this can add over 10 per cent to the member outcome. This means that while there is an outline glidepath for de-risking, we are able to bring some intelligence to the de-risking process that takes account of market trends, events and opportunities.

The strategy’s flexibility allows for innovation without disrupting members, and its member journey is incredibly simple and transparent. There is a single fund factsheet providing information about performance, portfolio structure and sustainability, plus a consistent annual management charge as members approach retirement.  

A systematic approach to driving value

The FutureWise strategy draws on Fidelity’s active management business, where we devote significant resources to better understanding macro and micro market dynamics. As driving value is an enormous priority for us, we access this intellectual capital in a streamlined way that we call ‘systematic investing’ for our fixed income portfolios and ‘enhanced research’ for equities.

The approach identifies value on a sector-neutral and region-neutral basis. This drives deeper diversification that is aligned to consumer demand by seeking out companies offering the best value on a systematic basis. 

Focusing on sustainability to drive better outcomes

Fidelity believes there are material environmental and social risks associated with the transition to a low carbon economy and that it’s important to use our influence as an asset owner to drive improved outcomes on behalf of our clients. 

That’s why we’re leading by example, with a net-zero target of 2030 for our own business operations, and shorter-term targets for 2024. For FutureWise, we have committed to a net-zero target of 2050 and halving emissions by 2030, in alignment with the Paris Climate Accord. 

Our FutureWise sustainable approach starts with socially responsible exclusions across the entire strategy (UN Global Compact Violators, country exclusions of Russia and Belarus, controversial weapons and small arms, tobacco, thermal coal and oil sands). It then goes a step further by integrating Paris Climate alignment into the portfolio construction process through a progressively reducing carbon budget. 

We integrate environmental, social and governance (ESG) risks through our proprietary ESG ratings that identify the sustainability outlook of companies relative to peers within their sector – capturing the value of building a more sustainable business, before it’s reflected in the market. 

One focus area of engagement for us is in using artificial intelligence and satellite imagery to monitor deforestation across wide supply chains and increasing transparency about its impact on local biodiversity. We have even co-sponsored a project with GreenPraxis that uses bioacoustics to measure the impact that deforestation has on biodiversity.

We are particularly proud of how effective these tools and embedded sustainability principles have been in driving improved impact on the world around us, and they have enabled us to make huge strides towards our net zero target. 

Looking for a better default? If you’d like to know more about how FutureWise could help with your clients’ pension schemes, or learn more about our approach to sustainability, please visit: fidelity.co.uk/futurewise

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