Ultimate Default Fund

Click on the fund to see why it was nominated

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• Aegon - Balanced Plus Select Portfolio (Risk Level 5)

  Joe Swanson, head of corporate benefits, Company Rapport

  We feel that although the fund is potentially more expensive than other default funds this is a truly value added proposition that makes full use of the usually superfluous extended fund range offered within many group personal pensions. Although there is no lifestyling arrangement offered with this fund our solution is to offer phased transition on an age related default basis into the lower risk Select Portfolios during the 10 years prior to retirement.
   
  We have selected this fund for a number of reasons. We like its independent research - funds are selected and monitored by OBSR and Mercer. OBSR build and manage the portfolio range. Both companies sit on Aegon’s Investment Advisory Committee.
  It has a well defined, rigorous and structured process of fund selection and portfolio formation. Portfolio is reviewed monthly and rebalanced daily.
  
  Fund selections are not restricted to Aegon funds, so no investment house bias or limitation. Funds are mostly specialist managed with few internal funds, offering a mix of active and passive managed funds.  It also offers true diversification - different fund managers with different styles and portfolio composition are selected within each sector/asset class.

• Nest – Retirement Date Funds

  Paul Todd, head of investment policy, Nest

  Nest went live only recently, so why might our Retirement Date Funds be considered alongside other entrants to this competition?
  
  We’ve carried out an unprecedented amount of research to create an innovative approach aimed at keeping members saving, managing risk and growing their retirement pots in a way that’s truly built for them: Nest is different by design.
  
  Nest Retirement Date Funds, yearly target date funds for every year a member might retire, aim for investment returns in excess of inflation after all charges over the long term, while the objective of the Growth phase of the funds – in which many members pots will be for decades - is to target CPI plus 3 per cent after all charges.
  We think a focus on protecting the real value of members’ contributions after charges is crucial, while delivering a sophisticated investment approach at a transparent low charge is imperative to prevent savers’ pots from being swallowed-up by charges.   
  
  We believe our focus on member outcomes and the value of their pot and income in retirement represents an innovation in DC investing.
  
  Our expected economies of scale mean our members can access a sophisticated approach to managing risk that’s delivered via leading fund managers at every stage of their saving with Nest. 

• Schroder Managed Balanced fund

  Laith Khalaf, pension investment manager, Hargreaves Lansdown

  Many balanced managed funds simply mirror other funds in the sector. In 2011 the difference between a top quartile and a bottom quartile fund was just 2.8 per cent, evidence of not so much a race to the top as a perfunctory lumber to the middle. Little wonder then that doubts abound over the value of ‘active’ management. The Schroder Managed Balanced fund takes a different approach and gives the highly experienced team the freedom to invest as their convictions dictate, a truly active mandate. This resulted in almost a fifth of the fund being held in cash in July as Schroder’s senior economists predicted trouble ahead.
  
  Few other balanced funds would be bold enough to diverge so much from the consensus weighting, to prioritise absolute returns for members before their peer group ranking. The lead fund manager is Johanna Kyrklund, who actually runs Schroder’s own pension fund, so their money is where their mouth is. The fund invests in other Schroder funds, from top managers like Richard Buxton and Leon Howard-Spink, offering exposure to their expertise at half the price of their individual funds. The proof of the pudding is of course in the eating. Over 10 years the fund has returned 75 per cent for investors; for what it’s worth, 20 per cent ahead of the average balanced fund. 

• Scottish Life Governed Range

  Patrick Connolly, head of communications, AWD Chase de Vere
  
  Scottish Life has won the Ultimate Default Fund award two years running and during that time the industry has seen an increase in the number of providers offering similar versions of their successful Governed Range.
  It's proof that a governed default option should now be considered the benchmark for all employees in contract based defined contribution plans.
  
  There are a number of reasons why Scottish Life has had continued success. The increased flexibility around the lifestyle switching really helps to meet employer and advisers needs in an increasingly complex market while the choice of risk graded strategies means that it is ideal for meeting different member risk profiles.
  However, it is their track record in providing a robust governance framework that really makes them stand out from the crowd. Scottish Life is committed to keeping ahead of the chasing pack and has plans for further developments to the investment proposition in 2012. It is this desire to continually improve member outcomes that earns them my vote as the Ultimate Default Fund.
  
  And
  
  David Taylor, managing director, Towergate Financial London  
  
  The recent DWP paper “Guidance for offering a default option for defined contribution automatic enrolment pension schemes” and the guidelines published by the Investment Governance Group at the beginning of the year show the regulator is serious about improving the design and governance of DC investment for members.
  Default fund design has moved into the modern era and with the advent of auto enrolment it’s more important than ever that the Ultimate Default Fund recognises the latest thinking on how to improve DC member outcomes.
  
  The solution needs to take into account members’ risk profiles based on analysis from investment risk experts and reflect changing requirements during the working lifetime. It should include a strong governance framework with processes for regular reviews to ensure ongoing suitability and a mechanism for making any changes required.
  
  We believe that this funds’ combination of risk graded lifestyle strategies, automatic rebalancing, strong investment governance process and three year track record provides members with a market leading default option.

• Scottish Widows' - Pension Investment Approach

  David Cooper, client manager, Creative Benefits
  
  To meet the brief simplicity in approach must be combined with choice and good value. Scottish Widows’ pension investment approach meets these three goals.
  
  Simplicity is delivered through good governance and seamless processes. Choice is provided through a range of pre-set portfolios. Value is provided through competitive annual management charges and low transaction costs.
  
  The good governance structures mean investors do not need to worry about day to day investment management. Scottish Widows take active responsibility for ensuring the funds remain fit for purpose.
  
  The simple three tier approach to risk and return, namely Cautious, Balanced and Adventurous is instinctively comprehensible and well supported by good information. When married with the automated risk reduction steps in the approach to retirement, which incur no charge, investors receive good growth prospects and stability in purchasing power.
  
  Importantly, these two key outcomes are delivered without the need for any individual fund selections or complicated decisions by employees and Scottish Widows offer ongoing choice through a wide internal and external fund range.

• Standard Life - Global Absolute Return Strategies fund

  Katherine Lynas, director, CAMRADATA
  
  At CAMRADATA we are used to seeing DB themes transfer across into the DC world. And one type of fund is set to make a big splash when it comes to DC solutions, the dynamic multi asset fund.
  
  Dynamic multi asset funds change their asset class exposure to reflect the economic environment, exploit market inefficiencies and reduce risk. The goal over the economic cycle is to better invest members' funds so they are only in positively performing asset classes. The fund managers are agile and decisive when it comes to moving funds' assets, and the members reap the rewards of this with higher returns and lower risk against traditional solutions.
  
  That's all well and good, but who is top of the pops when it comes to this fund type? We have developed a 7 factor quant screen, which identifies consistently good funds over a three year track record.  And the numbers stack up - Standard Life's GARS fund is head and shoulders better than the competition.  This fund now has enough of a track record to show it can operate around the economic cycle and it has been in the top 3 of CAMRADATA IQ's quarterly performance reports since the report's inception.