Professional Pensions spoke to Aberdeen Standard Investments senior solutions director Douglas Hogg as part of an exclusive series of interviews with some of the finalists and winners of the UK Pensions Awards. This is what he had to say…
What have been your main achievements as an organisation over the past 18 months?
Over the last 18 months we have expanded our pooled fund range to help address the changing needs of UK defined benefit pension schemes.
Our expanded liability aware fund range includes a series of pooled buy and maintain credit funds and a series of pooled liability-driven investment (LDI) profile funds. The fund range has been designed to allow schemes to create a bespoke solution to meet their specific objectives by combining allocations across the fund range. The funds were launched in June 2020 and were seeded by four pension schemes.
This year we also successfully launched our multi-sector private credit fund which aims to provide pension schemes with attractive income through diversified exposure to primarily investment-grade private and alternative credit assets.
What do you believe sets you apart from your peers and contributes to your successes
We recognise that all pension schemes are different. We partner with our clients and their advisers to understand their ultimate objectives and deliver solutions to meet each client's unique circumstances - wherever they are on their journey, and regardless of their ultimate endgame destination.
We work with a wide range of pension schemes of all sizes. Our full breadth of investment capabilities and pooled fund solutions help schemes achieve their specific investment needs.
As schemes approach their endgame, a very specific skillset is required to build and implement appropriate investment portfolios - our insurance heritage, extensive investment capabilities, and Responsible Investing approach makes us uniquely placed to work in partnership with schemes as they navigate to their endgame.
How has your business dealt with the challenges of Covid-19?
The impact of COVID-19 has varied across different schemes; from grappling with changes to employer covenant, to navigating the volatility of funding levels, all the way through to evaluating how to further de-risk (or indeed re-risk) their investment strategies as they look to achieve their long term funding objective.
In addition to moving to the new normal of working from home and ensuring no impact on the delivery of our investment management activities, we worked very hard to ensure we were able to continue to support our clients to address the challenges of Covid-19.
As well as helping our clients navigate any challenging circumstances, we also looked to identify opportunities for our clients that emerged through the course of the year. Of particular interest was the widening of credit spreads and the impact that had on schemes looking to secure a bulk purchase annuity, or those looking to implement a cashflow driven investment strategy.
What are the key challenges facing your pension scheme clients at the current time and how are you helping them address these issues?
For a number of schemes, the biggest challenge continues to be looking to close their funding deficit in a controlled manner. We offer a number of solutions to this challenge, from diversified growth funds, to providing access to illiquid assets, all the way through to innovative solutions that integrate LDI and synthetic growth strategies, which allow schemes to keep return potential in place whilst removing liability risk.
As schemes mature and turn cashflow negative, there is also an increased need to become more "cashflow aware" and think about how their investment strategy can deliver income to pay their benefits as they fall due. Our newly expanded Liability Aware fund range has been designed to help schemes address this challenge.
This aligns with The Pension Regulator's focus on having a long-term objective and a journey plan to achieve this objective. We have been working with schemes of all sizes to help them position their investment strategy as they look to navigate towards their endgame.
How will you continue to improve your services to pension scheme clients over the coming year?
The Covid-19 crisis has highlighted to many trustees and sponsors the burden of independently running DB pension schemes.
Of particular note during the start of 2020 was the influence that Covid-19 had in March, where we experienced all-time high levels of interest rate volatility. Even for schemes where a sophisticated LDI strategy was in place, liquidity and efficient collateral management became extremely important as some highly leveraged LDI funds struggled. In addition, due to the lockdown, trustees were struggling to arrange meetings and sign off required documentation.
For many schemes, an increased level of delegation to their investment manager can allow them to retain control of their overall investment strategy, while at the same time removing some of the governance burden of implementing that strategy. Over the course of the next year we will continue to enhance our technology and evolve the ways in which we can work in partnership with pension schemes and their advisers, to address these challenges in an efficient way.
Aberdeen Standard Investments was shortlisted in the Alternative Investment Manager of the Year; Environmental, Social and Governance (ESG) Manager of the Year; and Cashflow-driven Investment (CDI) Manager of the Year categories of this year's UK Pensions Awards. Find out more about the awards here.
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Past performance is not a guide to future results. The value of investments, and the income from them, can go down as well as up and clients may get back less than the amount invested.
The views expressed in this document should not be construed as advice or an investment recommendation on how to construct a portfolio or whether to buy, retain or sell a particular investment. The information contained is for exclusive use by professional customers/eligible counterparties (ECPs) and not the general public.
Aberdeen Asset Managers Limited is registered in Scotland (SC108419) at 10 Queen's Terrace, Aberdeen, AB10 1XL, Standard Life Investments Limited is registered in Scotland (SC123321) at 1 George Street, Edinburgh EH2 2LL, and both companies are authorised and regulated in the UK by the Financial Conduct Authority.