How much money are you managing for clients?
As of the end of December 2016 Scottish Widows was managing £120bn of assets on behalf of our customers. A year earlier, in December 2015, we were managing £112bn. Clearly market growth has helped, but supported over the period by good asset allocation decisions.
How have the events of the last year affected client sentiment?
We saw very little outflow relating to Brexit and indeed most of our multi-asset funds, with contribution from their overseas exposure, did extremely well around this period. So while markets have been helpful in growing our assets under management, our success has also been the result of investing in the right markets on behalf of our customers – which was very much the case during 2016.
Can you tell us something about your investment strategy?
Our goal is to deliver good investment performance at a competitive price. Unlike many of our competitors we don’t have an in-house fund manager. This means we’re impartial when we select fund managers to deliver our investment solutions. This means when we are searching for a fund manager, whether to run our investment mandate or to invest in their fund, we are able to balance two elements – price and capability.
Can you explain more about your team’s expertise?
In Scottish Widows, we focus on getting the investment strategy right, then choosing the managers we think can do the best job for our customers. This means identifying fund managers that can run the fund at a competitive price, taking into account their capability and their experience. We are looking first and foremost for a fund manager who is an expert in the asset class.
How do multi-asset funds fit into this strategy?
Our range of multi-asset funds represent two thirds of the assets invested on behalf of our customers. So of the £120bn invested for our customers, nearly £80bn of that is in multi-asset funds. The asset allocation of these multi-asset funds is set by Scottish Widows’ Asset Allocation team.
How does this affect your choice of manager?
Because Scottish Widows has no in-house manager, we are free to choose a fund manager who will do the best job for that asset class. That means we have multi-asset funds that feature a number of different managers. This is very much true of our Premier Portfolio range.
Are there plans to extend your Premier Portfolio range?
We launched the Premier Portfolios in December 2015 as an alternative to our core range of pension default portfolios, featuring a broader range of asset classes and fund management styles. In the last 12 months we have extended the range of assets available within the Premier Portfolio range. The Premier Portfolios now include commodities and High Yield Bonds and again, we have selected managers that excel in these asset classes.
How have these funds performed?
Over the last year 75 per cent of assets in our multi-asset funds exceeded their benchmark. Over the last decade our Pension Portfolios 1, 2, 3 and 4 have increased in value by over 100 per cent.
Do you have any plans in the pipeline?
We do have some exciting plans, but it’s first worth explaining that our core pension defaults have been in place since 2006 and they have a 10- year track record at a time when other providers have made changes to their offering. More recently, we added the Premier range and many of our pension investors, have switched to Premier after seeing the value it can generate. In terms of the pipeline, we want to offer greater choice for clients who remain invested beyond retirement. To this end we are planning a launch of variants of our core and Premier Portfolios for the increasing number of investors in this position.
How do you see the investment horizon evolving?
We believe our multi-asset investment approach is one of the most innovative – and successful – in the pensions market. Our Asset Allocation team focusses on making decisions that drive value. We are constantly looking for new approaches to investing – recognising the shift in demand towards the lower cost tracker funds passives while embracing the demand to deliver performance. This has led us to look at new and better ways to deliver investment of key asset classes, such as Smart Beta strategies. Our approach is to recognise customer needs and meet these through innovative investment approaches.
Find out more at www.scottishwidows.co.uk/advisersupport
Iain McGowan is head of investment proposition, Scottish Widows. Iain joined Scottish Widows in 1999 and has over 20 years of industry experience. He has previously held leadership roles in distribution and proposition management. Iain is a member of Scottish Widows’ Independent Governance Committee, which has responsibility for oversight of the scheme members’ interests. Iain is also Chairman of our Luxemburg SICAV and a Director of various property investment vehicles.
Sources: Scottish Widows
