Standard Life has launched a new alternative pension default solution focused on driving better member outcomes through increased exposure to private markets.
Future Opportunities is the latest evolution of the provider’s sustainable multi-asset strategy and builds on the existing lifestyle strategy by incorporating access to private markets.
Standard Life was an original signatory of the Mansion House Compact and one of 17 pension providers who signed the Mansion House Accord, voluntarily committing to invest more of their default pension options in private markets by 2030, provided this supports better outcomes for scheme members.
Based on its current forward-looking assumptions, the provider believes a long-term private markets allocation of around 25% has the potential to enhance returns and improve diversification for customers. Its strategic asset allocation and portfolio management process will gradually introduce private assets on a prudent basis as opportunities arise, alongside initial public market investment, the company said in a statement.
Dynamic basis
The solution will evolve on a “dynamic basis”, reflecting investment assumptions and prevailing market conditions to ensure members remain invested in a portfolio that reflects the most appropriate balance of risk and return at any point in time.
To support this, Standard Life said it has embedded significant oversight, including a series of reviews across strategic asset allocation, asset quality, pace of deployment, impact on net outcomes and fee transparency through a clearly defined performance fee model.
The fund is differentiated by design, with a focus on the quality of private markets opportunities, complete manager independence and discretion, and transparent fees and charges that future-proof the solution as private markets are embedded within pension defaults, the firm added.
To deliver what is said are better returns with lower volatility than public markets for members, Standard Life is drawing on the private market expertise of Future Growth Capital (FGC), which it said acts as a differentiator for the provider’s proposition.
Net outcomes for members
FGC specialises in private markets asset allocation, manager selection, direct deal underwriting, portfolio construction underpinned by ESG factors, relative value analysis and ongoing portfolio management. It operates with investment independence, focusing solely on delivering net outcomes for members.
Coinciding with the launch of the default strategy, Standard Life has also unveiled a clear and transparent charging structure. This includes an overall variable annual management charge (AMC) for private markets, alongside a specific LTAF performance fee designed to ensure members only pay more when performance targets are met.
The provider said the variable AMC at the overall default level ensures that members are only charged for the private assets that are held in the solution, rather than a future anticipated allocation. It said this also facilitates access to high-quality growth opportunities that have previously only been available to professional investors.
Alasdair Birrell, workplace investment development lead at Standard Life, said: “It’s going to be a multi-year journey and we’ll grow the allocation gradually and prudently to ensure outcomes are always prioritised, while continually building trust and familiarity in private assets among our clients and members. Under a variable charging structure, members only pay for the private allocation they have and not the one we’re targeting long term.”
Standard Life added that it has begun collaborating with regulators to implement change that will enable fair access to private market solutions for members in contract-based products, and is additionally planning options to provide the solution to the master trust self-select range.
