People’s Partnership

the people’s pension

I’m not sure what is going on at People’s Partnership or People’s Pension. Will someone explain what the people are getting? It doesn’t look like a partnership or a pension right now.

At £25bn and with strong positive cashflows, this mastertrust is one of the biggest DC schemes in the UK yet it currently has

• no commitment to get its assets delivering net zero emissions
• no allocation or plan to allocate to private markets
• No participation in the Mansion House Compact
• a partnership with an American asset manager based entirely on passive management

This suggests to me, that despite hiring a big name in Dan Misulskis and a previous big name in Nico Aspinall, this monster fund is not pulling up any trees in delivering a partnership and it’s showing precious little sign of producing any pensions for the people who save into it.

The big reveal this week has been in Net Zero Investor

Strategic overhaul at the People’s Pension: £15bn invested in climate tilted stocks

Which sounds great until you think about what the other £10bn is invested in. Labels like “climate tilted” and “climate aware” fall gracefully off the tongue but what do they actually mean. Anyone can be aware about a problem, but where is the evidence that the awareness is leading anywhere.

The claim that People’s Partnership/Pension are presenting us with is a 30% reduction in the emissions from the investment in the portfolio. This has been achieved in a “matter of months”. So what in heaven’s name was happening before?

An ongoing lack of an investment budget

Fancy newsletters and appearances at investment conferences can hardly paper over the cracks Dan. You appear to have no budget to do anything with the £25bn that could make me feel my money matters to the planet, society or in improving governance standards.

Mona Dohle, reporting on the “strategic overhaul” in net zero investor reminds us that for People’s Pension

 when it came to climate strategies, there was catching up to do, as Net Zero Investor reported in January. The fund is the only UK master trust which does not yet have a formal net zero strategy in place, though it pursues a net zero ambition.

The People’s Partnership also scored second lowest in a recent league table of the UK’s workplace pension providers, due to among others the lack of clear interim targets, continued exposure to fossil fuels and deforestation risks.

The strategic overhaul comes with some “not news” news.

“We believe that incorporating ESG factors in our investment decisions has the potential to contribute to risk adjusted returns for our members over the long-term. We consider climate change to be the ESG issue most likely to be material to member outcomes” he emphasised.

If that’s what “catching up” is all about, then I’d be seriously considering moving my money from People’s to any one of a number of master trusts who came to this conclusion some years ago and are now considering how to allocate to assets that work harder and faster.

Mikulskis said. Unlike some other master trusts, which have signed the Mansion House Pledge to commit at least 5% of their default portfolios to illiquid assets, the People’s Pension does not currently invest in private markets.

Mikulskis does not rule out that they could form part of the strategy as the fund grows in size, but he believes that several structural issues would need to be addressed first. “The fund industry offerings need to mature, for example through development of an industry funds management organisation as has been done in Australia or structures through third party managers”

The problem that successive CIOs at People’s Pension/Partnership have had , is a lack of budget. Constrained by self-imposed charge caps and by a mutual status that prohibits it to borrow to grow, People’s has simply not committed funds to investments. It has switched from Legal & General to State Street and now it is adopting a more climate friendly benchmark for its passive portfolio, but this is really nothing special.

Were People’s Partnership/Pension serious about investment, it would not be waiting for the fund management industry to find a solution for its lack of diversification into private markets. It would be exploring opportunities itself.

Mikulskis’ claims in Net Zero are bold

“We believe the changes we have announced mean that The People’s Pension is now one of the greenest master trusts in the UK, which is great news for our members. Asset owners like us are uniquely positioned to use our size and influence to ensure our members’ savings are allocated and managed responsibly, and that the companies in which we invest are acting in responsible and sustainable ways.”

The proof of that pudding is in the eating. Just what is People’s Pension, independently of State Street doing to justify its claims or is this just some adjustment of deckchairs?

I have little confidence that the “up to 85% shares” default fund is worthy of an organisation now investing £25bn of our savings. More needs to be done and quickly.

We also need to see clear evidence of a decumulation strategy that can show this is a “pension” and not just a tax incentivised savings scheme. I’d be happy to join a partnership to make that happen!