Royal London director of investment propositions Iain McLeod
Royal London has increased the target equity allocation for younger customers within the growth stage of all its target lifestyle strategies – increasing the proportion of growth assets from 82.5% to 92.5%.
The provider said the strategic enhancement to its target lifestyle strategies – including its default solution – came a bid to deliver improved retirement outcomes for members.
Royal London said that, as part of the move, it had increased the target equity allocation for younger customers within the growth stage of all target lifestyle strategies – a change it said had been made to the portfolios of all customers more than ten years from retirement invested in one of Royal London's target lifestyle strategies.
As a result, it said it had increased the overall proportion of growth assets in its default investment solution – the Royal London Balanced Lifestyle Strategy (Drawdown) – from 82.5% to 92.5%.
Royal London said the increase in growth assets was funded through a reduction in cash and fixed income allocations.
It said the remaining 7.5% of the default's allocation was invested across commodities and global high yield bonds.
The provider noted the allocation figures represented its target strategic allocation – adding it had the flexibility to make tactical adjustments based on prevailing market conditions if needed.
It added the UK currently accounted for around 23% of its default's equity allocation – adding that all of its current property allocations were also in the UK.
Royal London was one of 17 pension providers to sign the Mansion House Accord in May – pledging to invest at least 10% of its defined contribution (DC) default funds in private markets by 2030, with at least 5% allocated to the UK.
The provider told Professional Pensions it had long believed in holding more than just listed equities and bonds – noting real assets, such as property, were a key part of its default as well as its other lifestyle strategies.
It added that, as a signatory to the Mansion House Accord, it currently exceeds the 10% target of investing in illiquid assets in the portfolios used in the growth stage of the default.
The provider said it would continue to look at existing asset classes as well as new opportunities and continue to expand its investment capabilities to provide the flexibility to utilise both public and private market investments.
It pointed towards its recent addition of global asset-backed securities to its governed range – including the asset class in the portfolios used at the later stages of the default lifestyle to provide broader diversification benefits beyond traditional fixed income instruments.
Royal London director of investment propositions Iain McLeod said: "As a customer-owned business, we're constantly reviewing and evolving our propositions to ensure they meet changing customer needs and to reflect our ambitions to be a leader in diversified, future-focused investment strategies.
"We will continue to explore opportunities to enhance our range for customers, across private markets, alternatives, traditional fixed income and equities, as the backdrop continues to evolve."
He added: "This update, based on extensive modelling, reflects our belief in the long-term benefits of growth assets and our commitment to delivering better outcomes for members."
