Target date funds are now becoming part of the landscape, said AllianceBernstein at the launch of its new range of ethical target date funds for the UK defined contribution (DC) market.
The range is believed to be the first of its kind in the UK market and it will be proactively managed using underlying FTSE4Good indices and UK gilts.
According to AllianceBernstein, with annual contributions to the UK defined contribution market place expected to rise to £11bn in 2018, it estimates that by 2018 50% of default funds inflows will be into target date funds.
AllianceBernstein said the launch was also set across the backdrop of a growing demand for investments that consider environmental, social and governance (ESG) issues.
Tim Banks, AllianceBernstein head of DC client relations, said at the launch: "Ethical target date funds and the creation of a range of ethical target date funds is a real demonstration on the power of flexible target date funds.
"You can create fund ranges that are specific to clients' investment beliefs. We've always said that and this is our largest example of doing that."
The Pensions Trust is the first adopter of the range, offering it to all of their DC employer schemes on the SmarterPensions platform. The range will also be available for all contract-based schemes as well as trusts as a default or an ethical alternative.
"Not only is this the UK's first properly managed ethical strategy, and that's the point here, it's a strategy, it's not just a fund, but it's actually got one of the UK's largest ethical investors behind it," said Banks.
And since it is a strategy, Banks added that a mechanism must be in place to proactively manage the strategy to keep it fresh and up-to-date.
The ethical target date fund range will employ the same propriety Dynamic Asset Allocation (DAA) process as all other AllianceBernstein's target date funds. DAA is said to smooth the ride for investors, by making short-term adjustments to the asset allocation in order to de-risk the portfolio during times of extreme market conditions.
FTSE Group environmental, social and governance director David Harris: "This is a really important launch for the market, but what I also hope is that this is the start of a much broader debate about how the provision of sustainable responsible investment (SRI) options as well as the wider integration of ESG issues into DC provision."
Harris said that responsible investment is growing particularly among institutional investors and he said that this is important.
He said that it is important for individual members to have options which are aligned with their personal values. For investors, there is an increasing conviction that these issues are relevant for long-term investment.
And from a sponsor perspective, Harris said that sustainability is often a very important issue for organisations and companies. If these issues are understood from a business perspective, then it is expected that this would then be understood from an investment perspective and a pension provision perspective.
Harris said that growing demand for better stewardship and that this is about holding companies to account on governance issues as well as social and environmental issues.
"It's really great to see this out in the market. It's really important for the industry and we are really proud to be part of it," said Harris.
First published 22.03.2013
monique_simpson@wilmington.co.uk
