I’ve worked out what I want from the person who runs my pension fund – I want them to be busy doing nothing. That’s more or less what Martin Dietz is doing running the Legal and General Multi-Asset Fund which is the default for it’s workplace pension.
Some people have commented on here that I could be more ambitious than to use a default fund for my money. But I say show them another way I can get exposure to 11,500 different stocks all over the world for a management fee of 0.13%.
I’d hooked up with Martin on Linked In as I’d seen him on my fund factsheet. I’d asked if he’d like to meet an investor in his fund and he’d kindly obliged. We met at a posh cafe in the City.
Here’s a rough transcript of my agenda and what Martin told me. I hope that it’s a reasonable record and that my epithet “reassuringly boring” will be taken as a compliment. I am not looking for pyrotechnics, I want steady growth and limited drawdown.
I wanted to know from a personal and professional viewpoint his and LGIMs viewpoint on a number questions
- How does the targeting of MAF at DC savers affect the way you manage the fund?
- What are your private benchmarks for success with this fund?
- What are the main jobs you have to do as manager of the fund?
- How do you interact with the funds into which MAF invests?
- Do you see MAF as suitable for all stages of a DC saver’s journey
- Is MAF LGIM’s optimum fund for drawdown?
- Why don’t we hear about capacity issues with MAF (as we do with GARS and other rivals)?
- Do you share the group’s aims of social purpose?
- Do you see yourself adopting the ideas behind Nigel Wilson’s Beveridge 2.0 initiative?
- What interaction do you have with your IGC?
Here’s how the conversation went
How does the targeting of MAF at DC savers affect the way you manage the fund?
“To give you an example- before BREXIT I wrote to advisers explaining that though I expected Britain to “remain”, the fund was positioned to benefit from leaving. The economic harm of leaving would be softened for investors but they couldn’t expect the fund to pick up the full benefit of remain vote. I wrote this note to help people explain the fund’s behaviour. My thinking was that DC investors probably had enough to lose from BREXIT without their pension being at risk”
What are your private benchmarks for success with this fund?
“I want people to get an equity like return in the good times and have protection from equity performance in bad times. Currently the fund is providing a return that is around 3% less than the equity return – but equities have been the best performing sector of the market”.
What are the main jobs you have to do as manager of the fund?
“Firstly, I look at improving the diversification of the fund by investigating new funds, where we don’t have a fund I want, I help create the fund. For instance, we are looking at a way to access BBB credit funds
Secondly I look to increase the efficiency of the investment strategy by optimising the asset allocation
Thirdly I work on minimising the costs of the fund. This has been easy so far as we have been a small and growing fund but now the fund is valued at more than £2.6bn I expect transaction costs to increase though only to a few basis points.”
What are the restrictions you have in investing in funds?
“I won’t involve MAF in active fund management as it hasn’t got the budget (as a result of the charge cap). The fund is invested only in LGIM funds”
Do you see MAF as suitable for all stages of a DC saver’s journey?
“I’m aware of LGIM’s target date funds which move money from high to low volatile funds over a saver’s lifetime. We look to provide a consistent style of fund management which is very simple for investors to understand”.
Is MAF LGIM’s optimum fund for drawdown?
“There is another fund within the LGIM range (specifically the Retirement Income Multi Asset Fund (RIMA) which are used as defaults for drawdown, this aims to minimise the exceptional loss that can occur when a drawdown happens when the fund is severely depressed. However, we are comfortable with MAF being used for drawdown”.
Why don’t we hear about capacity issues with MAF (as we do with GARS and other rivals)?
“MAF is not invested in derivatives and invests according to market capacity. This gives it the highest level of liquidity- in other words it cannot run out of capacity to invest.”
Do you share your Group’s aims of social purpose?
“The work of our ESG and Stewardship team is to improve the performance of all stocks (MAF invests in 11,500 different stocks). Most of this work is in the UK but the Stewardship team is working more and more on overseas equities. We benefit from their work and decisions on where to allocate money are informed by their research on what markets show best governance”.
Do you see yourself adopting the ideas behind Nigel Wilson’s Beveridge 2.0 initiative?
“Not at the moment! The Diversified version of the MAF does have direct property holdings which may follow the approach the Group is using in the investment of Group Funds. But at the moment, our CEO’s vision for the future is not adopted in MAF.”
What interaction do you have with your IGC?
“I have to present the fund’s ongoing appropriateness once a year to the Chair but I am more accountable to the IGC’s investment consultant. Dean Wetton who asks a lot of searching questions and is vocal in challenging changes to the fund that might not be in member’s interests”
It was good to have breakfast with Martin, he forms part of a team but he spoke of MAF with great ownership and some passion. He told me his own pension money is invested there.
The question of whether a single fund can be right for all investors all of the time is a difficult one. But with the total charges on the fund still at 0.13% and with the fund grown from nothing to £2.6bn in under four years, he is clearly managing a compelling proposition.
Martin is very clear on his objectives, very precise in his language and extremely modest in managing expectations. A big bet from the Diversified version of the fund ended in a 10bp gain from up weighting property.
The very good year we are having with the fund (relative to the ABI45/85 sector average) reflects the BREXIT positioning and the fund’s lack of property exposure.
Martin is the least demonstrative fund manager I have ever met. He seems to make a virtue out of being boring which I suspect is exactly what the L&G MAF needs.
Here’s that pre-Brexit briefing in full