RTK: Sustainable Multi Asset is 5 years old. It’s been our flagship default for half a decade. I’m here with Garry Latimer and I’m Rebecca Tolland-King and we’re going to talk to you a little bit about what the strategy has achieved over that period of time. Garry, you’ve been involved in SMA over all this period of time, talk to me a little about the market conditions that SMA has faced over the past 5 years.
GL: So we’ve had a significant road test in the last 5 years, you know, post covid economic conditions, stagflation, we’re on our 4th prime minister within the UK, we’ve had, now president Trump 2.0, liberation day, energy crisis, oh in 5 years.. yeah.
RTK: Take me back to 5 years ago with that in mind, you were involved in the original design of Sustainable Multi Asset, I guess you were the architect of the strategy- what was in your mind when you were trying to evolve out that strategy and what outcomes were you planning to achieve?
GL: So, actually the first on is, we were trying to create something that would stand the test of time and that would live and grow with members and actually the first principle was around about that focus on member outcome so, as you know, we love the Pensions UK Retirement Living Standards, they help to give members a sense of actually how their retirement is linked to what the strategy’s doing, you know, we wanted to evolve our own thinking, so making sure we’re investment independent, so you know, being able to choose. We wanted to make sure that we could continue to grow the strategy and have the ability to make sure it was current and relevant.
RTK: We’ve seen that within the strategy over time, so for example, we’ve recently launched some new investments within the strategy, we’ve achieved sustainable disclosure requirements of Sustainability Improvers within the equities and corporate bonds within the strategy. That, for me at least, had been a major milestone- we’ve achieved broad market returns while managing a wide range of financial risks, including those related to climate risk. But Garry, what, on top of that, what has been a major milestone, from your perspective, over the past 5 years?
GL: So I think there’s a few in there so if we go back to the member outcome principle. So the growth strategy’s delivered a return of 55% on a gross basis so that’s above that inflation plus 3.5 modelled outcome metric, which is a 10 year metric, so actually, the strategy performed pretty well in that remarkable 5 year period. I think the other piece for me is we’re now at 2 million members, we’ve managed to upgrade from our previous active plus and passive plus strategies, giving some of those members a price saving as we went through that exercise so the strategy’s now at just short of 39 billion pounds which is obviously significantly above the nominal threshold for a default being at scale and I think the other part is there’s now an ecosystem around the strategy as well so members can select an alternative lifestyle profile, investment pathways, tune up or tune down risk using our future advantage range which are all using the same componentry, so it feels more like an ecosystem than a fund, a default fund.
RTK: Where SMA was 5 years ago and where it is now is incredibly different, sounds like very positive changes have happened. I’m going to ask you a question, you don’t have a crystal ball, but with your best guestimate, where would you see SMA going over the next 5 years?
GL: so, right now, we’re in the process of transitioning to a full growth model within the growth phase of the strategy so 93% equities on private growth assets, that’s one step. The next one obviously is the inclusion of private market assets so the strategy which we believe will significantly improve member outcomes over the medium to long term. And that’s something that we want to test with employers and trustees and that work’s already started. And I think the other one, from a sustainability point of view the world doesn’t stand still, you would hope that we continue to reflect sustainability so make sure that we’re mitigating financial material risk for members, in new and different ways.
RTK: Thank you for joining Garry and myself as we’ve chatted about Sustainable Multi Asset. If you would like some additional information on this strategy or anything that we’ve chatted through, or future direction, then please feel free to click on the links below and thank you so much for watching.
