Banking on innovation

by

6 May 2015

The HSBC Bank Pension Trust (UK) spent 2014 implementing a series of innovative changes to the investment strategy of both its defined benefit and defined contribution schemes. Chief investment officer Mark Thompson tells Sebastian Cheek about an eventful year.

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The HSBC Bank Pension Trust (UK) spent 2014 implementing a series of innovative changes to the investment strategy of both its defined benefit and defined contribution schemes. Chief investment officer Mark Thompson tells Sebastian Cheek about an eventful year.

Are you planning on offering drawdown as part of the scheme?

Never say never, but there is no intention at the moment to have a drawdown product, so members will have to go somewhere else for that.

How do you split your time between DB and DC?

On pure investment, more time is spent on DB, but there are other aspects of DC I get involved in such as communication and engagement. We actively monitor all funds on the DC platform and one of the reasons for having the white-labelled funds is if one of the underlying managers is not performing then we can change it straightaway. In fact, in the recent review six of the 12 existing funds had changes made to them; for example, we reduced the strategic allocation of both the passive and active global equity funds from 30% in the UK to 10% because that was more in line with the UK’s representation in the overall world index. We also changed the fixed income and index- linked funds to be more like pre-retirement funds to track annuity prices and we put a second manager into the emerging market fund and a second manager into the diversified asset fund.

The sponsor pays all members’ annual management charges. Does that make the charge cap irrelevant for you?

I am mindful of the cost to the sponsor, but the emphasis is always on what is best for the member. The recent changes slightly increased the overall cost, but the sponsor was supportive.

Does that mean you can use more active management?

Some 88% of our members go into the lifecycle default and in the early years of that it is the global equity passive fund, so more assets are invested passively than actively, but active funds are available and the members are free to choose.

Do you have any indication as to how members will now behave at retirement?

We are looking at doing some surveys so we have to see what experience tells us. Rushing into a solution too quickly might not be the best thing. The most important thing is making the options available to members.

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