In this episode of the weekly podcast Nico Aspinall and Darren Philp chat to SEI‘s Steve Charlton.

The conversation is over  SEI’s investment-led approach to running a master trust. It looks at  how the business has evolved from its roots as a technology firm into asset management and pensions.

The article spreads over  some of the big issues currently shaping the DC landscape, including the role of AI and technology, Mansion House and the debate around mandation, private markets, investment philosophy, and the Government’s continued push for greater scale in DC workplace pensions.

As it sticks with talking about how DC pensions work, this is worth the 84 minutes, I’d call it “value for time”.

I am not a fan of Defined Contribution as a means of providing pensions for ordinary people. Steve Charlton explains how SEI has attracted the employers he has. He explains that employers have chosen SEI to manage their workplace pension out of serious consideration of investment. This you would expect to come from companies with sophisticated employees. But Steve Charlton is talking to the subject of what makes for value for money and ends with two definitions

1. That it’s judged by performance net of fees
2. That it maximises the  regular income in retirement.

There is much in the bookends of football talk which I totally agree with. I know from talking with Steve this week that he is furious that his workplace , which is delivering more than any other by way of performance net of fees and is taking “decumulation” seriously, is under threat of closure. It needs to grow from under £6bn in size to £10bn by 2030 and then convince TPR that it can grow to £25bn by 2035. It must be hard for SEI to compete for new business with other providers who are not so threatened.

It is also a problem for SEI to invest in patient capital. Steve explains how hard it is to launch the SEI LTAF into the Master trust when in the short term , it may have a dilution of investment performance. So SEI finds itself struggling to take on board long term strategies when it’s long term prospects aren’t clear. This doesn’t come out of the podcast which is optimistic of SEI’s continues capacity to deliver good outcomes for its members.

If I was the SEI strategist , I’d think long and hard about converting to CDC. Not only is CDC not judged by size but it is able to deliver what Steve considers VFM without the constraints of having to make short term investment out-performance. Patient Capital can be achieved by taking a long term view and not by being judged by short term performance.

I think CDC would benefit from Steve Charlton’s attitude and SEI would benefit from converting from CDC. I don’t say this from an independent viewpoint, we hope to launch a CDC in 2027 and I am calling for more competition. I’m simply falling through the conclusions that Steve is coming to and suggesting a way for him to get out of the clinch he finds his master trust in.

This is a rare VFM podcast that doesn’t stray into a rant against CDC and it’s all the better for it. I hope that Steve, Nico and Darren read this and take my comments as constructive!