Peter Rutter, Head of Equities, Royal London Asset Management, tells how Australia’s more mature DC market helped RLAM build solutions to meet today’s difficult environment
RLAM has learnt a lot from the Australian defined contribution (DC) pensions market when building some of its investment solutions, according to Head of Equities Peter Rutter. A more mature DC market than that in the UK, Australia began tackling the problems that the UK pensions market is facing today many years ago.
Through conversations with Australian pension fund clients, RLAM has been able to begin building solutions that respond to these challenges before they developed in the local market. "I would go as far as to say that our inspiration for our low-cost active equity solutions comes from working with Australian superannuation schemes for the last 15 years," says Rutter.
The Head of Equities explains that traditionally, some Australian superannuation schemes employed a large number of asset managers to run dedicated strategies. The problem with this approach, however, is that "by the time you have 100 active managers that's a lot of work and complexity". This approach also inevitably leads to increased costs.
However, many Australian pension funds often look to remain active in their approach instead of seeking to lower costs through passive investing. Today, UK pension schemes are facing a similar challenge due to their need to meet ESG obligations, something that can be difficult to achieve through a purely passive approach.
One of the ways to solve this problem across asset classes is by building solutions that combine a systematic approach with active insight and scrutiny, to ensure a fund can offer true ESG stewardship benefits while remaining low cost. Being a responsible investor for RLAM means remaining active, so the solutions the firm is building to tackle this problem do not compromise on this element. With the growing importance of responsible investing and increasing regulatory scrutiny across the globe, these types of solutions are increasingly sought-after by pension funds.
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Click here to read more from the RLAM team on how DC pension schemes can rise to the challenge of today's market environment while addressing long-term decarbonisation goals
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This post was funded by Royal London Asset Management.