Schroder Life Dynamic Multi-Asset Fund

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Striking the right balance between risk and return
The Schroder Life Dynamic Multi-Asset Fund aims to provide DC savers with stable growth through a low cost exposure to a diversified range of assets.

The DC savings journey

Members in a defined contribution (DC) pension are on a journey. Well managed, this journey takes them towards a pot of money to meet their needs in retirement.

In the early stages of the savings journey, pension schemes can take on calculated risk to encourage growth and generate returns.

As the chart below illustrates, members move through three main phases on their savings journey. Here we are concerned with the ‘stable growth’ stage, when savers reach their 40s and their need for risk and return moves into rough balance. Growth remains important, but generally savers need to reduce their level of risk as there is less time to recoup losses.

The four main phases of the DC savings journey

Growth

Stable growth

Transition
into
retirement

Retirement

PENSION
AGE
35
55

This phase focuses equally on both risk and return in order to generate returns of 4% above inflation whilst significantly reducing the probability of loss

Growth

Stable growth - This phase focuses equally on both risk and return in order to generate returns of 4% above inflation whilst significantly reducing the probability of loss

Transition into retirement

Retirement

Source: Schroders. For illustrative purposes only.

Introducing the Fund

The Schroder Life Dynamic Multi-Asset Fund aims to provide a way for members in the stable growth phase of their savings journey to strike the right balance between risk and return, at an attractive price.

This balance is achieved through exposure to a range of assets which, when mixed together, provide long-term growth potential while aiming to avoid the extreme short-term losses that occasionally afflict financial markets.

We believe our approach could significantly reduce the probability of loss compared to a lifestyle strategy, which traditionally remains invested in equities until the last five years of retirement.

Probability of experiencing an annual loss greater than 20%

100

90

80

70

60

50

40

30

20

10

0
PERCENTAGE
EQUITIES LIFESTYLE
45-65
STABLE GROWTH LIFESTYLE
45-65

Source: Schroders. Equities Lifestyle 46-65 invests in a global equity portfolio, switching to passive index-linked gilts and cash over five years to retirement. Stable Growth Lifestyle invests in Schroder Life Dynamic Multi Asset Fund (DMAF), switching to passive index-linked gilts and cash over five years to retirement. Equity and bond volatility assumptions are based on historic monthly data. Expected return assumptions are based on forward looking estimates. DMAF expected return and volatility assumptions assumed to be in line with the target (target of CPI+4% and volatility of half to two-thirds of equities). For illustration only. This data should not be relied on to predict possible future results.

KEY FEATURES

Capped charge
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A capped ongoing charge of 0.40%, including an annual management charge of 0.35%

Inflation-beating returns
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A level of growth that offers real returns in excess of inflation CPI +4%*

Volatility management
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A systematic approach to volatility management to deal with all market conditions

Multi-asset portfolio
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A broadly invested multi-asset core portfolio with active asset allocation

Volatility target
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A volatility target of between a half and two-thirds of global equities

Managed by experts
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All managed by the Schroders Multi-Asset Team

*The return and maximum loss targets are investment objectives only and not guaranteed

Investment process

Traditionally, cost constraints have meant many DC investors have been limited to balanced or passive global equity investment strategies, which have failed to provide the inflation-beating growth they need at an acceptable level of risk.

Compared to these traditional investment strategies, our Dynamic Multi-Asset Fund is unique in the following ways:

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It offers savers a cost-effective way to gain access to multi-asset specialists who manage risks by making use of a wide range of assets, including equities, bonds and commodities.

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We believe that this active asset allocation is more than adequate to deal with most market conditions. However, our systematic volatility management automatically reduces exposure to global equity markets during periods of high volatility with the aim of creating a smoother growth path.

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This is all available at a cost well below the UK government’s new pension charge cap of 0.75%.

Fund information

Contact

Stephen Bowles

Head of UK Institutional Defined Contribution

Tel: +44 (0) 20 7658 4916

Email: stephen.bowles@schroders.com

Tim Horne

DC Investment Solutions Manager

Tel: +44 (0) 20 7658 4877

Email: tim.horne@schroders.com