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DC schemes need better diversification

20 May 2013

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Defined contribution (DC) members are receiving "inferior" investment services compared to defined benefit (DB) members through a more restricted access to asset classes, a report stated.

The report, Mind the Gap, which is commissioned by The Defined Contribution Investment Forum (DCIF), examined the barriers that exists to good portfolio construction in DC schemes, in particular the ability to access liquid investments.

Certain investment strategies, in particular those that require less liquidity, are currently "out of the reach" of DC schemes, because of requirements around daily pricing and trading, and Spence Johnson, the author of the report, argued that the daily dealing requirement should be relaxed.

DCIF chairman and Standard Life Investments investment director Andy Dickson said: "We believe that at present there are many DC schemes which do not give members adequate access to excellent investment services.

"Part of this problem is the lack of effective diversification through new asset classes. The opportunity for greater diversification is a potential enhancement to current best ideas and has the potential to both improve member outcomes and also to improve the member journey."

First published 20.05.2013

monique_simpson@wilmington.co.uk