Schroders, the London-listed fund manager, believes it is bringing defined contribution (DC) product development up to date with the launch of a dynamic multi-asset fund that is designed as a low risk, low cost alternative to passive default funds.
“Until now DC product development has lagged behind that of DB [defined benefit] schemes…” said Johanna Kyrklund, head of multi-asset investments at Schroders.
The low cost active fund is aimed at the corporate DC pension fund market where many employees’ funds are invested in passive funds if they do not elect another, usually more expensive active strategy.
Multi-asset investing is seen by some as a useful product for DC pension funds where employees bear the investment risk but lack the skills to make adequate asset allocation decisions.
Multi-asset investing is also seen as having a wider role to play in the mass retail market, where individuals may lack access to adequate financial advice.
At Fund Forum International in Monaco this year, Jamie Broderick, the European CEO of JP Morgan Asset Management, said target date, multi-asset investing could help make the retail pensions market more efficient and useful for individuals, as well as give asset managers a greater role in providing advice to individual clients who are normally accessed through intermediaries.
The Schroder Dynamic Multi-Asset Fund, therefore, although not a target-date fund, appears in the context of fund managers looking for better ways to serve their DC and individual clients.
The fund aims to achieve a target return of CPI + 4% pa net of fees over a market cycle of typically five years and to do this with half to two-thirds of global equity volatility and a total expense ratio capped at 50bps.
Diversification is sought through actively managed allocations to core global equity strategies, commodities, emerging market debt and global high yield. A further strategic allocation to fixed income will help manage volatility and downside risk.
Kyrklund, who will manage the fund, said that the actively managed asset allocation provides diversification but at acceptable cost and risk levels for DC investors.
©2011 funds europe