The Schroders Retirement Benefits Scheme (SRBS), the pension fund for the asset manager’s employees, has allocated £800m of its defined benefit (DB) section assets to Schroders’ cashflow-driven investing (CDI) building blocks.
The scheme is aiming to de-risk and better match future returns with cashflow requirements, it said.
Vivien Cockerill, chair of the fund’s trustees, said: “SRBS is rapidly maturing and, as a result, was facing a range of challenges. Our long-term objectives entailed maintaining return expectations while providing for expected or, indeed, any unanticipated liabilities.”
She said that Schroders’ CDI solution met these challenges and allowed the scheme to invest in higher-yielding medium-dated credit assets to “help secure the required growth, while also meeting cash flows without significant downside risk”.
Momentum Investment Solutions & Consulting independently advised the fund on the appropriateness of the strategy, which aims to generate sufficient cashflow by investing in more predictable assets to enable pension funds to meet their payments.
It will also provide greater confidence over returns than traditional growth assets, it said.
Schroders’ CDI strategies invest in a core of liability-driven investment (LDI) and global investment grade buy and maintain (B&M) credit portfolios supported by a range of higher yielding diversified fixed income assets.
SRBS also increased its allocation to B&M credit and interest-rate and inflation hedging within its LDI portfolio.
As for its defined contribution (DC) section, its latest DC governance statement said that following a review in April, the scheme completed several changes during Q4 2019.
The changes include the launch of a new default investment option called the SRBS Default Lifestyle Strategy, which will introduce a new equity strategy in the growth phase and will also shift the retirement outcome target from an annuity focused target to an investment allocation.
This will better support the various ways members are now taking their retirement benefits, Cockerill said.
The new default strategy will take greater account of environmental, social and governance (ESG) related matters in the investment process, something the trustees have been keen to implement on behalf of members, she added.