Interview | Rachel Neill
“The main challenge for
master trusts at the moment is the fee structure.”
Smart Pension’s head of sustainable investment, Rachel Neill, tells Mona Dohle about ESG and the default fund,
outsourcing engagement, the problem with fees and why bonds are now an alterative.
Smart Pension currently offers its mem- bers the option to invest in the Smart Future Fund, an ESG-compliant fund made up of building blocks from LGIM’s Future World Fund range. Why does this fund mirror the current default fund’s allocation? We want to give members the option to invest in line with their values but have the same geographical exposure as the default fund. We do not want them to feel like they had to choose something that was com- pletely out of whack from the default option. Nor did we want them to pay more for it, so it is priced the same as the default fund.
Why are you planning to make the default fund ESG compliant?
ESG principles are applied across our entire fund offering and we are going to
include ESG-specific funds into the default where more than 90% of our members are invested. That is part of a broader strategic asset allocation review which we have undertaken on our default fund and self-se- lect options. Our current default fund is arguably quite bland. It is 85% equities and 15% fixed income. The trustees and Smart’s invest- ment managers undertook a review and by balancing risk and reward and ESG princi- ples have endorsed a change to the asset allocation of our default to include asset classes like alternatives and, of course, the ESG-specific funds.
In the defined contribution (DC) world, the level of engagement with members is rather low and most are invested in the default fund despite research showing that the majority want their pension assets in
18 | portfolio institutional | December-January 2020 | issue 89
green strategies. So is making the default fund ESG compliant a way of increasing the uptake for the ESG strategy? Absolutely, but it is not the only reason. Engagement in DC is typically low but when members are made aware of the things their savings are invested in, we know
that engagement increases. We
recently held two member webinars where members could ask questions. We received quite a few interesting questions on what the default fund is invested in, our expo- sure to fossil fuels and so on.
There is anecdotal evidence that members care about ESG, albeit in a master trust with such a diverse member base, the views are going to vary widely. But you’re right, engagement with members is a big part of that.
Another big factor is trustees thinking about the financially material risks in our
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44
