Aegon has announced plans to strengthen its largest workplace default, the £12bn Universal Balanced Collection fund, with a new private market investment and enhanced ESG integration.

Aegon joined the Mansion House Compact in July 2023 as one of the founding signatories, committing to allocating at least 5% of its default funds to unlisted equities by 2030.

When speaking to IPE earlier this year, Aegon’s head of retail investment Niall Aitken said that the way Aegon looks at the Mansion House agenda is broader than just increasing private equity investment, and instead it is “very much focused on broader private market access” as it can deliver “better outcomes”.

At the time it said that in order to get there it needs to find the “right” asset manager, but once it is on the journey it expects private market exposure to reach 10-20% over the next couple of years.

Today, Aegon said that it will enhance its largest workplace default, the £12bn Universal Balanced Collection fund, introducing an innovative private market investment and enhanced ESG integration.

The transformation will take place from Q3 2024, with a target to improve outcomes for over 700,000 members currently invested in the fund; it aims to provide better risk-adjusted returns and value for money, offering access to a wider range of responsible investment opportunities.

The Universal Balanced Collection fund is available to Aegon Retirement Choices and One Retirement investors, as well as some off-platform products.

Aegon said it will partner with three fund managers to provide a bespoke solution, for use within the Universal Balanced Collection, “leveraging their dedicated, specialised expertise and resource”.

BlackRock will manage a bespoke, diversified alternative private markets strategy, including private equity, private debt, real estate and infrastructure. It will also manage a fully ESG integrated passive equities and bonds strategy with a year-on-year decarbonisation target, from Q4 2024.

Aegon Asset Management will manage a new multi-asset credit mandate, which includes global high yield, asset-backed securities and emerging market debt strategies, from H2 2024. In addition, the firm will also manage a private debt and alternative fixed income fund, subject to Financial Conduct Authority approval and operational considerations, from early 2025.

Aegon building image

Aegon will partner with three fund managers – BlackRock, Aegon AM and JP Morgan AM – to provide a bespoke solution

Additionally in early 2025, also subject to FCA approval and operational considerations, JP Morgan Asset Management will manage a bespoke strategy, offering exposure to private equity, infrastructure and forestry.

The proposal is to house the private market allocations within Long-Term Asset Fund (LTAF) structures, subject to regulatory approval.

Carne Group will be acting as the authorised corporate director of the Aegon Asset Management and JP Morgan Asset Management LTAFs.

Aegon said the plan is for these enhanced capabilities to extend to members across Aegon’s wider workplace default range in the future.

Lorna Blyth, managing director of investment proposition at Aegon, said: “We believe our changes will improve the growth potential of the Universal Balanced Collection and future Aegon funds that utilise these enhanced capabilities. The changes target robust risk management and diversification, to offer members improved outcomes and value for money.”

She said that this move also aligns with Aegon’s commitment to reach net zero greenhouse gas emissions for its full range of default funds by 2050, and to a 50% reduction in emissions by 2030.

According to Blyth, it also “significantly supports our desire to invest £500m in climate solutions by 2026” with investments that directly contribute to climate change mitigation and/or adaption.

“We expect many of these solutions to come from unlisted equities which aligns with our Mansion House Compact aim to invest at least 5% of our default fund assets in unlisted equities by 2030,” she noted.

“On completion of the Universal Balanced Collection changes in 2025, we anticipate that we will have moved over £30bn of default assets into funds that consider ESG factors.”

Read the digital edition of IPE’s latest magazine