Schroders pension scheme allocates to in-house cashflow-driven investing solution

The Schroders Retirement Benefits Scheme (SRBS) has allocated GBP800 million of its Defined Benefit Section assets to Schroders’ cashflow-driven investing (CDI) building blocks, as it aims to de-risk and better match future returns with cashflow requirements.

CDI aims to generate sufficient cashflow by investing in more predictable assets to enable pension funds to meet their payments, while also providing greater confidence over returns than traditional growth assets.

Schroders’ CDI solutions invest in a core of Liability Driven Investment (LDI) and Global Investment Grade Buy and Maintain (B&M) Credit portfolios supported by a range of higher yielding diversified fixed income assets.

The LDI and B&M portfolios are structured and managed within Schroders’ Portfolio Solutions team along with the overall solution design and oversight, whilst the remaining strategies are delivered by specialist teams across Schroders.

Since investing in Schroders’ LDI and B&M portfolios, SRBS has extended its CDI allocation to include a range of Multi-Asset Credit, Securitised Credit and Junior Infrastructure Debt assets.

SRBS also increased its allocation to B&M Credit and interest-rate and inflation hedging within the LDI portfolio.

Jon Exley, Solutions Manager, Schroders, says: “SRBS has reached a position where it is looking for more stability in its funding position. The key benefit of our CDI solution is that it can provide greater certainty over asset returns while still targeting the growth required to meet the long-term funding plan.

"The allocation to Schroders’ CDI building blocks and wider solution is testament to both our investment capabilities and our focus on working in partnership with clients to address their investment challenges.”

Vivien Cockerill, Chair of Trustee, SRBS, says: “SRBS is rapidly maturing and, as a result, was facing a range of challenges. Our long-term objectives entailed maintaining return expectations while providing for expected or, indeed, any unanticipated liabilities.

"We felt that Schroders’ CDI solution met these challenges. It enabled SRBS to invest in higher-yielding medium-dated credit assets to help secure the required growth, while also meeting cash flows without significant downside risk.”

Momentum Investment Solutions & Consulting independently advised the SRBS Trustee on the appropriateness of the strategy and Schroders’ CDI building blocks.

Richard Cooper from Momentum Investment Solutions & Consulting, says: “The changes that the Trustee of the SRBS has successfully implemented materially improve the confidence they can have in achieving the returns they are expecting, over the time horizon that they are expecting to achieve them.”