Schemes must consider specific ESG allocation, says white paper
Analytical services company Camradata has published a white paper investigating defined contribution (DC) investment options and market challenges for investors.
The firm's white paper, titled A Universal Solution for the Individual, examines trends in DC assets and shares insights from its recent DC roundtable which involved investment managers and pension managers from a number of firms.
The roundtable revealed, according to a Willis Towers Watson study on global pension assets, DC assets have overtaken defined benefit (DB) assets for the first time, having grown at a faster rate of 8.9% while DB assets have grown by 4.6% globally.
While 82% of the UK market is still invested in DB assets, Camradata stated this is "set to change".
The white paper looks into the challenges and investment opportunities currently in the DC market and how these can be adapted across schemes and individual members.
In particular, it suggests further considerations are needed around ESG integration and whether specific allocations should be made in all aspects of capital management, not merely offering it as an option on the side.
Managing director Sean Thompson said: "There are a variety of DC options available to the investor, but employers must decide which one would be most suitable for their employees.
"In addition, as the interest in ESG factors swells globally, there is more of a requirement for a variety of options across investments."
The white paper also suggests cutting costs and fees to make things "cheap" does not equate to value for money, and reveals fresh thinking is needed on how trustees might get the kind of risk-return pay-off they need for the coming years.
Thompson added a key issue holding up the DC market is "the slowness of financial services in the UK to embrace technology".
"It is imperative for the DC pensions industry to be more mobile, as a greater proportion of the population becomes aware that they have one of more pension pots," he continued.
More on Defined Contribution
Phoenix launches ESG DC default solution
Phoenix Group will launch an ESG defined contribution (DC) default solution for pension fund clients of its Standard Life Assurance business and their scheme members.
Industry Voice: Beyond the pandemic
Newton’s Curt Custard considers the investment outlook for 2021 and the implications for DC schemes
Master trust investments 'more sophisticated' but 'growing pains' hinder progress
Master trusts’ investment strategies have grown and become more sophisticated over the last three years, but “growing pains” are hindering progress, according to the Defined Contribution Investment Forum (DCIF).
Exclusive: BlackRock's flagship LifePath strategy to target 50%+ ESG by mid-2021
More than half of BlackRock’s flagship UK defined contribution (DC) default fund’s assets will be invested in ESG strategies by June 2021.
