DC just took a little step forward…
Here’s AllianceBernstein‘s press release (with the flim-flam deleted and my comments in blue)
AllianceBernstein has launched a range of ethical target date funds for the UK DC market. Good news, we all know that ethical screening can enhance returns net of charges but no-one’s had the guts to put their money where their mouth is.
The funds will be proactively managed using FTSE4Good indices and UK gilts. Excellent, this means they should not cost a fortune but should harness the economies of scale that an indexed approach brings. I can’t comment on the index’s value relative to other such indices but “in FTSE I trust” (hope my gravestone doesn’t read “MUG”.
The fund range employs the same proprietary dynamic asset allocation processes as other AllianceBernstein target date funds. That’s fine by me, their standard TDF‘s are well managed from a TAA perspective ( so say my investment mates at First Actuarial).
This approach is designed to smooth investment volatility by making short term asset allocation changes to de-risk the portfolio during difficult market conditions. This is dull nonsense, TAA is there to get people more money in retirement (though a smoothed return is nice , it’s a secondary consideration so a “mark off” for that flannel. We are not in mark2market DB land here).
The Pensions Trust is the first adopter of these funds and offers them across all their employer schemes. Well done PT – I understand it’s good news for the Social Housing Pension Scheme too. The market rumour is that the funds are going to be seeded with £100m of PT funds – hope PT confirms this as I will give them a double round of applause it it’s true. In any event, they are putting money where the mouth is!
AllianceBernstein’s head of defined contribution client relations Tim Banks (pictured) believes target date funds are now in the mainstream and the launch is evidence they can be used to create strategies specific to clients’ investment beliefs. Bang on! In the US of A they are the only game in town as they’ve woken up to the fact that TDF works better than “lifestyle” – let’s hope we follow suit so people like me don’t have to lifestyle our way into (relative) penury – see this blog (light in the lifestyle tunnel).
FTSE Group’s environmental, social and governance director, David Harris added: “There is growing demand for investments that incorporate environmental, social and governance considerations. Well there should be, it’s called a social conscience and is a commercial position (see below).
“This can be to align personal values with investment approaches, but is also because many investors expect companies that perform better on ESG criteria to be better long term investments. Indeed (see above)
“These new funds will also allow employers which themselves operate responsibly, to offer an aligned socially responsible option to their staff as they save for retirement. Don’t push your luck Tim… you calling my lot irresponsible? …want to step outside for a moment? etc
Seriously, the sooner the large insurers who operate workplace savings plans switch to Target dated funds, the better.
The sooner that alternative indices such as, TOBAM and FTSE4GOOD get offered at fair prices within DC fund the better
The sooner that more asset managers give up their expensive alpha safaris and start offering us smart Beta as Alliance Bernstein are doing the better.
So , excepting the smoothing twaddle 10/10 for AB and 10/10 for the Pension Trust.
Stand up- take a bow – you have put your money where your mouths are. Great stuff – thanks!
Technical note on that cartoon caption
If your company has DB liabilities with the Pension Trust or Social Housing Pension Scheme, they should at the very least be exploring the DC options provided by the Pension Trust (which can ease acute threats caused by the threat of section 75 debts)… but also because these DC options are good news in their own right!
- What to do about commission (henrytapper.com)
- Taking meaningful investment choices off the shelf (henrytapper.com)
- Better ways to diversify the default. (henrytapper.com)
- Cometh the hour;- the Regulator gets its man (henrytapper.com)
- Light in the lifestyle tunnel! (henrytapper.com)