Schroder Life Dynamic Multi-Asset Fund
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
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
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
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%
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.
A capped ongoing charge of 0.40%, including an annual management charge of 0.35%
A level of growth that offers real returns in excess of inflation CPI +4%*
A systematic approach to volatility management to deal with all market conditions
A broadly invested multi-asset core portfolio with active asset allocation
A volatility target of between a half and two-thirds of global equities
Managed by experts
All managed by the Schroders Multi-Asset Team
*The return and maximum loss targets are investment objectives only and not guaranteed
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:
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.
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.
This is all available at a cost well below the UK government’s new pension charge cap of 0.75%.
DC: why market wobbles can lead to bad behaviour
Our consumer research suggests that the August dive in markets...
Head of UK Institutional Defined Contribution
Tel: +44 (0) 20 7658 4916
DC Investment Solutions Manager
Tel: +44 (0) 20 7658 4877