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Schroders FTSE DC report starts to evidence investment diversification

Schroders is today announcing the details of its fourth FTSE DC report, which is, for the first time since its launch, starting to evidence investment diversification in some of the largest defined contribution schemes in the UK.

05/11/2014

Schroders is today announcing the details of its fourth FTSEi DC report, which is, for the first time since its launchii , starting to evidence investment diversification in some of the largest defined contribution schemes in the UK. Key highlights, which can be found within the full report, include:

A typical default DC fund of a FTSE pension scheme has decreased its exposure in developed equities to three quarters (75%) of the overall fund allocation – down from 80% in March 2014.

FTSE 100 firms’ default DC funds have decreased UK equity exposure by 3 percentage points (down from 32% to 29%) and global equities by 2 percentage points (45% to 43%). This takes overall developed equities exposure to 72% of the total allocation, the lowest proportion since our research series began.

FTSE 250 firms have seen the greater change, decreasing UK equity exposure by 5 percentage points (38% to 33%) and global equities by one percentage point (45% to 44%). This takes total allocation to developed equities to 77%, down from 83% in March 2014.

Fixed income and alternatives have both seen a slight resurgence, rising by two percentage points respectively in the last six months. The typical default DC scheme of a FTSE pension scheme now has 9% in fixed income and 10% in alternatives.

Over half of schemes analysed (26 out of 40) invest in alternatives, such as property, private equity and hedge funds, this asset class has seen the greatest increase in weighting range with the maximum allocation increasing from 34% in March 2014 to 43% currently.

Stephen Bowles, Head of Defined Contribution, Schroders comments:

“At a recent conferenceiii we asked attendees if they thought the increased flexibility announced in the spring 2014 budget was a good thing for DC pensions, 84% of respondents replied yes. We also asked if DC schemes will need to have multiple default investment strategies to target different outcomes i.e annuity, cash and drawdown. An overwhelming 78% of participants responded yes to this question.

It is very encouraging to see evidence of diversification starting to come through in the latest report findings. We firmly believe diversification is a key element in defined contribution default investment design.”

 

i FTSE International Limited ("FTSE") © FTSE. "FTSE®" is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE International Limited under license. All rights in the FTSE indices and / or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and / or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE's express written consent

ii First DC Report findings issued March 2013. The DC default funds of 20 FTSE 100 and 20 FTSE 250 companies have been researched for this report. Data as at: Research for the 6 months to 31 September 2014.

iii Responses received from over 70 pension schemes, independent trustees and consultants

 For further information and to receive a copy of Schroders’ FTSE DC Default Report, please contact:

Estelle Bibby, Senior PR Manager

Tel: +44 (0)20 7658 3431/estelle.bibby@schroders.com

Notes to Editors For trade press only.

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Schroders plc

Schroders is a global asset management company with £271.5 billion (EUR339.0 billion/$464.1 billion) under management as at 30 June 2014. Our clients are major financial institutions including pension funds, banks and insurance companies, local and public authorities, governments, charities, high net worth individuals and retail investors.

With one of the largest networks of offices of any dedicated asset management company, we operate from 37 offices in 27 countries across Europe, the Americas, Asia and the Middle East. Schroders has developed under stable ownership for over 200 years and long-term thinking governs our approach to investing, building client relationships and growing our business. Further information about Schroders can be found at www.schroders.com.

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