Can pensions schemes suffer diseconomies of scale? – with James Lawrence, CIO of Smart Pension

Combating climate change risk – with Naomi Clark, head of investment product management for USSIM

Naomi Clark, head of product management for USSIM, is our latest guest on The Professional Investment Podcast. She chose the FT’s story that wild temperature swings are becoming the new normal as her news story of the week. Naomi explains how even small temperature variability will create big challenges not only for our health but also for the economy. She noted that article’s emphasis on the economic impacts of climate change echo the concerns of USS. She explains the scheme recently worked with the University of Exeter to produce different climate scenarios which highlighted both the economic damage of climate change and the benefits of action. This work led USS to pursue an agenda of systemic change – working with other asset managers to build alliances to lobby the UK government for policy change. But it’s not enough to make domestic changes – even if the UK had the most forward-thinking climate change policy, the world would still burn without global action. That’s why Naomi was recently in Singapore to meet with internation asset owners and persuade them to lobby their governments for change. We discussed how company engagement remains important even if USS has recognised systemic change will really move the dial. And that portfolio diversification is also important, especially for a universal asset owner. Finally, Naomi asked other asset owners to work with USS to bring about the systemic climate change we need. Now is the time to be bold, she said. ⸻ ABOUT THE GUEST: Naomi has responsibility for oversight and implementation of investments USSIM, including the selection and implementation of external and internal managers and mandates, the implementation of the defined contribution product, and the implementation of responsible investment. Additionally, Naomi has shared responsibility for Investment Advice provided to the trustee. Naomi joined USSIM from JP Morgan as Business Development Manager running front office projects across the scheme, she subsequently became the LDI & Treasury Manager, with responsibility for the external LDI mandate. Following that Naomi focused on strategy solutions provision for the scheme within the Strategy Co-ordination team, helping to implement the scheme’s Reference Portfolio before taking responsibility for the design and implementation of the new DC Product. Naomi graduated from Loughborough University with a degree in English Literature and subsequently gained a first-class degree in Finance from Oxford Brookes University, additionally holding the ACCA & IMC qualifications. ⸻ ABOUT THE HOST: Charlotte Moore is an award-winning journalist and co-founder of Moore Squared Communications. She has spent almost two decades writing about how the UK’s largest investment organisations allocate their capital for a number of different specialist magazines including Professional Pensions, IPE and MandateWire. She started this podcast to increase understanding of how and why the UK’s £3 trillion pensions industry invests its members’ capital to provide the best possible retirement. 🔗 https://mooresquaredcommunications.com/the-professional-investment-podcast/ Chapters: 00:00 Introduction and DC Megafunds Debate 04:00 Scale, Diseconomies, and UK Productive Finance 08:00 Fund of Funds, Private Equity Routes, and Fee Management 11:30 Co-Investment, Secondaries, and Private Asset Classes 15:00 Internal vs External Investment Management 19:30 Green Infrastructure and Renewable Energy Investment 23:00 Sustainability, Net Zero Targets, and Climate Pragmatism 26:30 Policy, Industry Reactivity, and Closing Thoughts #EnergyTransition #ClimateRisk #PensionInvesting #ESGInvesting

Can pensions schemes suffer diseconomies of scale? – with James Lawrence, CIO of Smart Pension

James Lawrence, CIO of Smart Pension, is our guest for episode six of series six of The Profession Investment Podcast. He chose Professional Pensions story that there’s no guarantee DC megafunds will lead to higher returns. We discuss how there is currently a tendency to think bigger is always better in pensions schemes. But any investment professional knows size can also hinder investment returns – there are good reasons asset managers gate funds at certain sizes. If asset owners want to invest in smaller companies and smaller asset managers, one solution is to build third-party fund of funds who can select those specialist asset managers. Fees are obviously an important consideration in this scenario as private assets are already more expensive and fund of funds add an extra layer of fees. Kept a lid on these costs is vital. James unpacked the different ways asset owners can invest in private equity and the different pros and cons of primary and secondary investing as well as co-investing. We broadened the discussion to different types of private assets and where they belong in a DC portfolio before diving into a debate about whether asset owners should be thinking about building internal teams to invest in private assets or use third-party asset managers. We discussed the resources and time needed to build an internal team and whether this would ever be as effective as an asset manager given asset owners can pay less and don’t have the same track record. Finally, James talked about how Smart Pension is investing in green infrastructure which led us to debate how sustainable investing and net zero is evolving. ⸻ ABOUT THE GUEST: James has over 12 years' experience in the pensions industry, mainly in consulting and investment management. At Smart Pension, James is the Chief Investment Officer and responsible for building and overseeing the investment solution. Prior to joining Smart James worked at Mercer, managing the investment proposition for Mercer Workplace Savings in the UK DC workplace delegated business. ⸻ ABOUT THE HOST: Charlotte Moore is an award-winning journalist and co-founder of Moore Squared Communications. She has spent almost two decades writing about how the UK’s largest investment organisations allocate their capital for a number of different specialist magazines including Professional Pensions, IPE and MandateWire. She started this podcast to increase understanding of how and why the UK’s £3 trillion pensions industry invests its members’ capital to provide the best possible retirement. 🔗 https://mooresquaredcommunications.com/the-professional-investment-podcast/ Chapters: 00:00 Introduction and DC Megafunds Debate 04:00 Scale, Diseconomies, and UK Productive Finance 08:00 Fund of Funds, Private Equity Routes, and Fee Management 11:30 Co-Investment, Secondaries, and Private Asset Classes 15:00 Internal vs External Investment Management 19:30 Green Infrastructure and Renewable Energy Investment 23:00 Sustainability, Net Zero Targets, and Climate Pragmatism 26:30 Policy, Industry Reactivity, and Closing Thoughts #PensionProtectionFund #UKPensions #PensionsPolicy #RetirementIncome #ProfessionalInvestment

Dynamic debt investing – with Charlotte Vincent, co-head of fixed income at People’s Pensions

Charlotte Vincent, co-head of fixed income at People’s Pension, is the latest guest on The Professional Investment Podcast. She chose the FT’s story that the Iran war inflation shock is set to fall short of the 2022 surge. Charlotte explains she is always looking at inflation and its impact on fixed income assets as it is important to generate real returns for scheme members to ensure they have a good retirement. We discussed People’s Pension’s approach to fixed income and how they choose to make their portfolio dynamic when they appointed Invesco as their fixed income manager in February last year. Charlotte unpacks how the fund can change multiple aspects of the fixed income portfolio including the regional exposure, the duration of the portfolio, the mix between sovereigns and corporate. She talks about the benefits of their £250m collateralised-loan obligation portfolio and how helpful the floating rates have been in this very volatile fixed income environment. People’s recently split out the fixed income portfolio for its members in the growth part of their journey and those in the pre-retirement part of the journey. That has allowed them to tailor the fixed income investments to the very different requirements of these two cohorts. Finally, the two Charlottes discussed who will be the future buyers of UK gilts as closed defined benefit pensions wind down. Chalotte Vincent mentions a recent FT Alphaville article which suggested issuing more short-dated government debt. We finished our discussion pointing out the growing demand for global credit from both insurers and auto-enrolled workplace schemes and asked what can be done to encourage both the UK and European markets to increased fixed income securitisation. ⸻ ABOUT THE GUEST: Calum Cooper joined Hymans Robertson in 2003 as a graduate with degrees in software engineering and finance. He qualified in 2007, became a partner in 2011 and led our growing Trustee actuarial, investment and administration business for four years. These days he’s an owning partner sharing broad and unique pensions strategy, risk and digital expertise to clients to over £10bn. Calum brings a collaborative and creative approach to advice. Always with a focus on making progress against clear and shared long-term objectives. He has chaired our investment consulting leadership team and nowadays with responsibility for Pensions Policy he is a spokesperson for Hymans Robertson. Outside of work he is an enthusiastic cyclist and runner, rusty guitarist and a family man with two energetic boys Harris and Quin. ⸻ ABOUT THE HOST: Charlotte Moore is an award-winning journalist and co-founder of Moore Squared Communications. She has spent almost two decades writing about how the UK’s largest investment organisations allocate their capital for a number of different specialist magazines including Professional Pensions, IPE and MandateWire. She started this podcast to increase understanding of how and why the UK’s £3 trillion pensions industry invests its members’ capital to provide the best possible retirement. 🔗 https://mooresquaredcommunications.com/the-professional-investment-podcast/ Chapters: 00:00 Welcome and This Week's News Story 00:54 Why Real Returns Matter for Members 02:27 A Dynamic Approach to Fixed Income 05:05 CLOs and the Case for AAA 09:57 Splitting Growth and Pre-Retirement 14:23 Cutting Duration and Sovereign Debt 17:25 The Decline of DB and the Gilt Market 23:54 Private Credit, Global Credit and Europe #PensionProtectionFund#UKPensions#PensionsPolicy#RetirementIncome#ProfessionalInvestment

Reshaping the regulator with Calum Cooper, head of pensions policy innovation at Hymans Robertson

In this week’s episode of The Professional Investment Podcast, Calum Cooper, head of pensions policy innovation at Hymans Robertson, joins the show. We discuss Professional Pensions story that The Pensions Regulator is conducting its latest five-year review of its corporate strategy. The regulator said its mission is to protect workplace pensions members' money, enhance the pensions system and support innovation in members' interests. The consultation lasts until 8 June. Calum said this represents a change in strategy away from a regulator concerned with the health of individual schemes and more towards a prudential authority. This reflects the strong funding levels in the industry allowing for this different focus. The TPR’s strategic shift raises the question of how it will interact with the Financial Conduct Authority in the future. Many in the pensions industry would prefer to only work with one regulator. We discuss whether the introduction of retirement income will lead to a focus on longevity as a potential asset class as pension providers look to collectivise this risk for members. Calum discusses the different ways this risk can be managed including annuities. We also discuss another news story questioning how the Pension Protection Fund should be treating its reserves, which are currently £14bn. Calum outlines what options could be explored to expand the investment options while also ensuring the PPF continues in its lifeboat role. Finally, we ponder whether bigger is always better in investment and how £100bn pension schemes can still invest in innovative asset classes. ⸻ ABOUT THE GUEST: Calum Cooper joined Hymans Robertson in 2003 as a graduate with degrees in software engineering and finance. He qualified in 2007, became a partner in 2011 and led our growing Trustee actuarial, investment and administration business for four years. These days he’s an owning partner sharing broad and unique pensions strategy, risk and digital expertise to clients to over £10bn. Calum brings a collaborative and creative approach to advice. Always with a focus on making progress against clear and shared long-term objectives. He has chaired our investment consulting leadership team and nowadays with responsibility for Pensions Policy he is a spokesperson for Hymans Robertson. Outside of work he is an enthusiastic cyclist and runner, rusty guitarist and a family man with two energetic boys Harris and Quin. ⸻ ABOUT THE HOST: Charlotte Moore is an award-winning journalist and co-founder of Moore Squared Communications. She has spent almost two decades writing about how the UK’s largest investment organisations allocate their capital for a number of different specialist magazines including Professional Pensions, IPE and MandateWire. She started this podcast to increase understanding of how and why the UK’s £3 trillion pensions industry invests its members’ capital to provide the best possible retirement. 🔗 https://mooresquaredcommunications.com/the-professional-investment-podcast Chapters: 0:00 Welcome to the Professional Investment Podcast 0:43 This Week's News Story: TPR Launches New Corporate Strategy 2:06 From Safety Net to Outcomes: The Regulator's Big Shift in Tone 3:57 What TPR's New Direction Means for Investment Product Manufacturers 6:39 Longevity as an Asset Class: CDC, Annuities and Pooled Solutions 9:18 The Pension Protection Fund's £14 Billion Surplus Problem 13:40 Should the PPF Get a New Mandate? Investing for Society 17:00 Nationalisation Risk, Government Temptation and Squaring the Circle 20:35 Infrastructure Partnerships: Pension Capital Working Together 23:51 A Bold Idea: Transforming the PPF into a CDC Growth Vehicle 26:37 Where Should TPR Be in 2031? A Vision for the Next Five Years 28:05 Open Finance, Agentic AI and the Future of Pension Regulation 30:04 Mega Funds, Value for Money and the Risk of Investment Herding 33:42 Final Thoughts and Sign Off #PensionProtectionFund #UKPensions #PensionsPolicy

Improving longevity with pension pots – with Maiyuresh Rajah, director of investments at Aviva

Maiyuresh Rajah, director of investments at Aviva, is this week’s guest on The Professional Investment Podcast. He chose Pension Age’s story about TPR outlining its vision for megafunds and simplified pensions market by 2036 as his news story of the week. Now the debate about pension schemes investing in private assets has been settled, providers are starting to put their private asset allocations in place. Mai discusses the approach Aviva is taking to its private asset allocation – which using a multi-asset approach including third-party managers as well as Aviva Investors. While pension providers are taking many different approaches to investing in private assets, this may diminish over time as the sector consolidates. There is a concern it will become harder for pension providers to allocate capital to smaller managers as the assets under management become larger. Mai suggested said smaller asset managers need to build strategic partnerships throughout the investment chain – both with larger private asset managers and with asset owners. We unpacked how the contractual over-ride in the Pensions Scheme Act will allow insurers like Aviva to shift members of legacy schemes to better pension provision. Mai also outlined how Aviva is building a retirement income for members so they can access drawdown earlier on and then ensure there is an annuity to provide an income for life. Finally we talked about the private asset investment opportunities – such as allocating to healthcare companies – which Mai feels excited about. There is a nice symmetry to improving later life and longevity by investing for retirement, he added. ⸻ ABOUT THE GUEST: Maiyuresh Rajah, Director of Investments at Aviva Mai is responsible for all investment activity across Aviva’s Wealth business, which includes strategy, proposition development, investment governance and asset transitions across the workplace and retail pension businesses. He has over twenty years' experience in the pensions industry and has held senior roles in investment consulting, asset management, investment proposition and business development. Mai is passionate about delivering innovative investment propositions so that people can invest sustainably for their futures and meet their financial goals. He is also a Scheme Strategist for the Aviva Master Trust and works closely with the Trustees of the Master Trust. ⸻ ABOUT THE HOST: Charlotte Moore is an award-winning journalist and co-founder of Moore Squared Communications. She has spent almost two decades writing about how the UK’s largest investment organisations allocate their capital for a number of different specialist magazines including Professional Pensions, IPE and MandateWire. She started this podcast to increase understanding of how and why the UK’s £3 trillion pensions industry invests its members’ capital to provide the best possible retirement. 🔗 https://mooresquaredcommunications.com/the-professional-investment-podcast/ Chapters: 00:00 Introduction to Maiyuresh Rajah of Aviva 00:44 TPR’s vision for megafunds and pension reform by 2036 03:02 Why private assets are now central to DC pension investing 04:11 Aviva’s private market allocation strategy 06:18 Different approaches to investing in private markets 08:36 Why multi-manager private market strategies matter 11:21 Pension consolidation, megafunds and the risk of losing innovation 14:00 How smaller asset managers can stay relevant 17:35 Contractual override and improving legacy pension schemes 20:53 Building better retirement income solutions for pension members 24:50 Drawdown, annuities and income for life 27:24 Investing in healthcare, longevity and later life outcomes 30:00 How the Pension Schemes Act could improve retirement outcomes 31:42 Final thoughts and closing remarks #Pensions #PrivateMarkets #RetirementIncome #PensionReform #Aviva