Cushon targets private markets under new investment strategy

Cushon has announced plans to target 15 per cent allocation to private markets under its new investment strategy, expected to launch in early 2022.

The investment strategy was announced alongside research from the provider, which suggested that 62 per cent of employees would engage more if they knew their pension was having a positive impact on climate change.

It is thought to be the largest allocation to private markets by a master trust, with Cushon also reportedly becoming the first in the defined contribution (DC) sector to deliver impact across 100 per cent of its portfolio.

The strategy aims to increase the potential for greater investment returns by focusing on greener companies that are expected to perform better in the long-term, and will see investment in environmental projects, such as the planting of new sustainable forests and the financing of new wind and solar farms.

It will use listed bonds and equities and a multi asset private markets portfolio, across both developed and emerging markets, to deliver on social impact.

The provider acknowledged that private markets in emerging markets “historically have not played a big part, if at all, in DC pensions”, clarifying however, that they can offer improved potential returns with “markedly reduced investment risk” thanks to diversification.

Investments in the new high impact projects will be managed by Schroders Capital, whilst Lombard Odier Investment Managers will manage listed bonds.

Wellington, meanwhile, will manage listed social impact bonds, and Macquarie will manage listed equities "to a Cushon custom-designed climate and social impact index" created by Solactive.

Cushon Master Trust chair, Roger Mattingly, highlighted the changes as demonstration of the provider’s commitment to sustainability and responsible investment, arguing that this can support better long-term financial outcomes for members.

“We have spent considerable time undertaking due diligence of the investments and fund managers, as well as negotiating costs to ensure that we can include private market investments well within the confines of the charge cap,” he continued.

“We are certain the new investment strategy will deliver excellent retirement outcomes for our members.”

Adding to this, Cushon CEO and founder, Ben Pollard, commented: “A good number of people will be able to name their pension provider, but a miniscule proportion will be able to name the underlying investments.

“This passive relationship has become the industry norm, but it’s one of the reasons there is apathy, particularly among younger savers.

“We need a new approach that places saver engagement at the heart of the pensions industry.

“That’s why a big focus of our new investment strategy includes, for the first time for the DC market, connecting savers with investments in projects and companies that they can feel proud of and engage with.”

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