At NOW: Pensions we’re firm believers in simplicity and this is certainly true of our approach to investments.
Unlike many providers, instead of offering a choice of funds, we offer one unified investment strategy. By taking this approach, members aren’t faced with having to make complicated decisions about how to invest their pension savings.
The vast majority of savers don’t have the knowledge, confidence or appetite to make their own investment decisions and as a result 99% of auto enrolled savers will end up in their pension provider’s default fund.
At NOW: Pensions we remove the burden of choice with all member funds going into our sophisticated Diversified Growth Fund. As the member nears retirement we then gradually move those contributions into a safer environment. We do this to reduce the impact of any sudden market surprises that might jeopardise any retirement plans.
We adopt a balanced risk approach to investing which involves a much higher degree of diversification than typical equity dominated investment styles. Our research, and that of independent consultants, is that this approach offers the probability of significantly improved risk-adjusted returns over the medium to long term.
The NOW: Pensions Diversified Growth Fund launched on 18th December 2012. Between then and 6th September 2017, the fund has delivered member returns of 46.8%. That translates into an annualised return of approximately 8.5% throughout almost five years. In 2017 alone, the fund has delivered a return of 9.8%. Those figures represent extremely good returns for members of the NOW: Pensions scheme.
Of course, during periods of very strong equity market returns such as we have witnessed over the recent past, the fund will be outperformed by funds with a high equity content. However, the investments we make must display risk /reward relationships that are in the best interests of the portfolio.
We do not believe that exposure to currency exchange rates falls within that category, and we therefore hedge our currency exposure on overseas investments back to sterling. By doing so, we can ensure that members’ funds will not be impacted by exchange rates, be they strengthening or weakening.
Our investment strategy has been independently assessed by investment consultants Redington whose recent report noted that “the team think deeply about portfolio construction and risk factor correlations. Particular attention is paid to the volatility and stress scenarios. This is a sophisticated approach to multi-asset investing.”
With an uninterrupted focus on a single investment solution, we can ensure a strong approach to investment governance, allowing members to concentrate on the things they can influence – fundamentally when they plan to retire, what they plan to do when they do retire, and how much they should be saving to turn their dreams into a reality.