People’s Pension has altered the investment strategy of its pre-retirement glide path to reduce exposure to cash, gilts and other sovereign bonds.
The master trust says these changes are designed to boost outcomes for its 1.7m members approaching retirement.
Around £6bn is invested in the pre-retirement portion of its main default fund. People’s Pension says this change means this part of its default is now anchored around a global portfolio of high-quality short-dated corporate bonds, actively managed by Invesco. This includes US, European dn UK investment grade corporate bonds, as well as selective exposure to US and European high yield bonds.
People’s Pension says the global nature of these bond holdings is important to ensure sufficient diversification and liquidity which is not available in the sterling market alone.
It adds that its holding in cash has been reduced and reflects the declining competitiveness of cash as a long-term strategic asset as interest rates fall. It says that as its default is now using segregated mandates, a cash buffer is also no longer essential.
People’s Pension says its partnership with Invesco embeds robust responsible investment expectations, from RI policy alignment to bespoke engagement.
The increase in allocation to Invesco-managed bonds therefore means a greater proportion of the pre-retirement fund is now covered by the Scheme’s climate targets, exclusions policy, ESG reporting requirements and other RI objectives.
It adds that cctive management in fixed income offers distinct advantages over passive approaches, particularly given inefficiencies in index construction and the structure of bond markets.
The equity portion of the pre-retirement fund will continue to be passively managed by Amundi and listed infrastructure by State Street.
The strategy design was informed by People’s Pension’s proprietary dataset, which includes insights from hundreds of thousands of member interactions in the lead-up to retirement representing a range of real-life member outcomes from cash out to ongoing drawdown. Development work continues on future retirement drawdown products for older savers.
People’s Partnership chief investment officer Dan Mikulskis says: “These changes reflect both our asset ownership model which constantly evolves our investment strategy in line with market realities and member needs and the power of our partnership with Invesco. By focusing on high-quality corporate credit, we aim to deliver better real returns while managing risk responsibly.”
Chris Fagan, chair of the investment committee for People’s Pension adds: “Our driving focus is always to improve outcomes for our members. These changes are grounded in analysis and clearly defined investment beliefs, and we firmly believe they will help us to continue to deliver more stable and rewarding retirement journeys for millions of savers.”
Tony Wong, senior managing director & co-head of investments at Invesco adds: “Invesco is delighted to have supported People’s Pension in the restructuring of its pre-retirement proposition and to play a bigger role through our active credit funds in creating positive outcomes for members at this critical stage in the retirement journey.”
