HSBC scheme launches LTAF as it adds private markets to DC default

HSBC Bank Pension Scheme said is committing to incorporating private markets into its defined contribution (DC) default investment strategies by partnering with Fulcrum Asset Management to create a bespoke multi-asset private markets Long-Term Asset Fund (LTAF), which now has regulatory approval.

An allocation to the LTAF is being made in the context of the trustee’s wider changes to the DC default investment strategies with the aim of accessing a broader range of more sophisticated and diversifying investment opportunities.

In doing so, the trustee is seeking to improve the outlook for members by targeting a higher expected risk-adjusted investment return for those with DC benefits within the scheme, as well as driving forward innovation within the DC industry.

Russell Picot, chair of the HSBC Bank scheme trustee board, said that improving expected member outcomes by targeting better risk-adjusted returns through diversifying the assets in which members’ savings are invested have been at the heart of the HSBC scheme.

He said: “I’m delighted for our scheme to take this step for our DC members and to drive positive change within the pensions industry.”

Laura Myers, partner and head of DC at LCP, the scheme’s consultant, added that the HBSC scheme’s investment in private markets is “an important step for the DC industry”.

She said that the successful launch of the “largest LTAF” for a single trust scheme and incorporating it into the investment strategies demonstrates the dedication of the trustee and pension scheme executive team to driving innovation with the aim of improving member outcomes.

Matthew Roberts, partner and head of alternative solutions at Fulcrum, said the strategy provides access to a panel of illiquid investment specialists, which combine to form a bespoke, diversified and flexible solution for the HSBC scheme to deliver better expected outcomes for its DC members.

Schroders and first LTAF

At the end of March 2023, Schroders launched the UK’s first private markets LTAF. The fund focuses on providing opportunities for UK pensioners paying into DC schemes to access a myriad of opportunities across Schroders’ private asset investment expertise.

Earlier this month, Schroders was awarded £150m by the UK’s chancellor of the exchequer Jeremy Hunt under the Long-Term Investment for Technology and Science (LIFTS) initiative and said it plans to launch a UK venture and growth LTAF, seeded with a cornerstone investment of £300m and open to third-party investors.

The LTAF will aim to stimulate the UK venture capital ecosystem by mobilising institutional investment into UK technology and life science companies. It will seek to provide institutional investors with opportunities to invest long term, through private markets as well as public, into early-stage growth businesses.

It has the potential to realise significant value for both investors and for the UK economy, the firm said.

Read the digital edition of IPE’s latest magazine