Annoyingly, I can’t comment on Laura Myers quote as the article is sat behind a paywall.

This quote about the launch of a sleeve of illiquids in the HSBC master trust is also from Laura Myers but taken from Pension Age  (not behind a paywall).

“We’re proud to have been part of this project leading the way for single trust schemes with an innovative bespoke solution designed to enable members to benefit from investment in illiquid assets.

“The successful launch of the largest LTAF for a single trust scheme and incorporating it into the investment strategies demonstrates the dedication of the trustee and pension scheme  executive team to driving innovation with the aim of improving member outcomes.

Somewhere in this is an organisation called Fulcrum. It’s not clear what partner and head of alternative solutions, Matthew Roberts does for his mandate  but he adds:

“It is an honour to be appointed for this mandate by the trustee.

“The strategy provides access to a panel of illiquid investment specialists, which combine to form a bespoke, diversified and flexible solution for the HSBC Scheme to deliver better expected outcomes for the Scheme’s DC members.”

There is a lot of self congratulation and a lot of jargon, but just what are the members of the HSBC master trust getting and what are they losing.

As I understand it, they will be losing investment in the L&G Future World fund (which I am invested in). This is a phenomenally successful fund , principally because it invests with a bias towards US tech stocks and is benefiting from the current mania for AI related investment.  This fund was created a few years back for HSBC with the help of the genial cove Mark Thompson.

But what will they be getting?

“a panel of illiquid investment specialists, which combine to form a bespoke, diversified and flexible solution”

This tells the readers of Pension Age very little about what they are investing in, just that there are a lot of people involved in doing the investment. “Bespoke” to what? How is it  “diversified” and what is “flexible” about a fund of illiquid investments?

The innovation is an LTAF , a long-term assets fund, which has been created for HSBC (as Future World was). The excitement is that this is part of a DC plan offered just to Bank employees (the Bank having given up on its master trust). Historically, all the investment costs are picked up by the Bank , is this the case here?

Future World was made available to L&G savers as part of their workplace pensions, will the LTAF be available too? The chief feature I get from all this is the exclusivity of the arrangement to HSBC – a single employer pension scheme.

Let’s turn to the comments of the Chair of Trustees , Russell Picot – for an answer

“Improving expected member outcomes by targeting better risk adjusted returns through diversifying the assets in which members’ savings are invested have been at the heart of the HSBC Scheme.

“I’m delighted for our scheme to take this step for our DC members and to drive positive change within the pensions industry.”

This gets us no further, as Hamlet worded it’s just – “words words“. What positive change does this mean for me or for anyone not in HSBC’s scheme? Is this fund replicable elsewhere, if not – what new ground has been broken for the “pensions industry”.

Is the HSBC scheme  an anomaly?

It is quite easy, where all costs are passed on to the sponsor, to spend as much as you like on setting up an LTAF, appointing a panel of investment experts, using top consultants and swapping L&G for Bespoke LTAF.

What members of HSBC’s DC scheme should be asking is whether this reorganisation is going to deliver better investment returns than are being achieved from L&G’s Future World and how this is going to be evidenced.

I have no issue with LTAFs or the illiquid investments that can go into them. Assuming the LTAF and Future World are both offered to members at “no cost”, then the “quality” of the solution can readily be assessed. Assuming that is that valuations on the underlying investments are precise and the method used to get them transparent.

Laura Myers claims

The HSBC Scheme’s investment in private markets is an important step for the DC industry.

If this is the case, can we understand just what the investment is and how it can benefit savers who don’t work for HSBC?

If the LTAF is curated to savers like me as Future World has been, I will say thanks (again). For now I reserve my judgement on the extravagant claims being made. Show us the proof of your pudding!