Retirement Fund Choices

If you've got a Legal and General (L&G) pension, this ones for you... I've come across a few clients with the default fund - L&G PMC Multi-Asset Fund 3. Looking under the bonnet, it has 40% in equities and the rest into alternatives such as bonds. There is a lot of evidence to suggest someone with a long term investment horizon should be weighting their investments heavily in favour of international equities. Equities are the good companies of the world and have proven the ability to maintain pace with inflation. Just look at how supermarkets have been able to up their prices and maintain profitability. You wont notice it, but inflation is the major risk to your retirement plans. Put simply, if you were planning to spend your retirement buying a load of freddos at 10p, it's gonna be really disappointing to find they are 30p when you retire. Over the last 3 years, the multi asset fund has returned 3.10% per year to the end of Jan vs some alternatives around 8%. Now, don't lose faith in Legal and General, but do go and have a look at the alternative fund choices. Take this opportunity to have a read around, learn and have a think what is best for you. Your future self will thank you.

This Pension mistake nearly cost £644,044: Simon, 36, earns £78,000 annually and contributes 5% to his workplace pension, which his employer matches. He assumed he was on track for a strong retirement. But here’s the problem: he was invested in the default fund. Many workplace pensions automatically place you in a default fund, designed to be low-risk and conservative. But low risk often means lower growth—and over decades, that can cost you hundreds of thousands in lost returns. Simon’s original pension projection at 65 was £766,597. Not bad, right? But when he switched to a growth-focused fund, aligned with a higher long-term return strategy, his projection jumped to £1,410,641. That’s an extra £644,044, without increasing contributions—just from choosing a better fund. What can you do? 📌 Check where your pension is invested—don’t assume the default is best. 📌 Understand your risk tolerance—younger investors can generally take more risk for higher potential growth. 📌 Look at long-term performance—growth funds historically deliver better returns over decades. 📌 Review regularly—pension schemes change, and so should your approach. Your pension could be your biggest financial asset, but only if you make it work for you. When was the last time you checked yours?

The CALIFORNIA PUBLIC EMPLOYEES RETIREMENT SYSTEM (CalPERS) has 2.2 million members and assets of around $510 billion. It is the largest state pension fund in the U.S. On its website it notes that “Under the California Constitution, the Board of Administration has a fiduciary duty to act in the best interests of its members and employers.” Which means generating long-term returns since it has current liabilities for generations to come. Critics on both the left (who accuse CalPERS of not doing enough to address system-level issues such as climate change and DEI) and on the right (who accuse them of doing so for politically motivated reasons) conveniently ignore this fact. Given the prominence CalPERS has had in the development of sustainable investing, I thought it would be interesting to see how it has evolved. The origins can be traced back to 1984 when CalPERS initiated its corporate governance reform program. Over the course of 30 years, CalPERS has been a leader in building the field of sustainable investing and developing its own internal capabilities. Two activities that contribute to each other. The most recent articulation of CalPERS' strategy for sustainable investing was presented at its board meeting on July 15, 2024 by Peter Cashion, CFA, Managing Investment Director, Sustainable Investments. He discussed the objectives for 2030, explained the rationale and positioning of sustainable investing at CalPERS, provided an update and some examples, and gave an overview of CalPERS' $100 Billion Climate Action Plan. While CalPERS' fiduciary duty to its beneficiaries is clear, I doubt that will prevent its critics on both the left and the right from attacking it for their own political agendas. Such is life in the U.S. "ESG Culture Wars," which rage on. CalPERS has proven itself adept at dealing with pressures on both sides given its high degree of transparency and willingness to engage. No doubt its strategy for sustainable investing will continue to evolve so it can provide retirement payments for its beneficiaries in a complex and changing world for pension funds. https://lnkd.in/eTnpps_f

“I’ll sort it later. I’ll be fine.” Those were Jeff’s words until he saw his projections…😳 This was Jeff’s mindset when it came to his pension. At 30, he was automatically enrolled in his workplace scheme, putting in £250 a month. His pot sat at £30,000, and he assumed that was good enough. Fast forward to 40, and his pot had grown to £100,000 but he had never really paid attention to it. Then, at a work event, a colleague mentioned they’d reviewed their pension investments and were targeting 8% growth per year. Jeff was curious so he checked his own pension statement. It had been growing at just 4% per year. The wake up call: Jeff ran the numbers. If he stayed in his default pension fund, his pot at 65 would be worth £420,000. His colleague, who had taken advice and optimised their pension, was on track for £1.1 million. Same contributions. Same starting balance. But a £700,000 difference 🤯 That’s when it hit Jeff. How much money had he left on the table because he kept saying, “I’ll sort it later”? The fix - taking control of his Pension 🙌 Like many people, Jeff had fallen into a common trap: assuming his pension was working for him, without checking. He realised he had never: ❌ Assessed his risk level—was he being too cautious for his age? ❌ Reviewed his investment strategy—was he missing opportunities for growth? ❌ Considered his lifestyle in retirement, what bucket list things does he want to do? ❌ Thought about his retirement goal - was he even on track? With expert guidance, Jeff took action: ✅ Moved to a diversified portfolio suited to his long-term goals ✅ Increased contributions through salary sacrifice, boosting his pension while reducing tax ✅ Ensured he was maximising employer contributions The Outcome: A smarter future Jeff’s new strategy put him on track for over £1 million in retirement savings without drastically increasing his contributions. It wasn’t about paying in more. It was more about making his money work harder. The biggest lesson? “Later” is the most expensive word in finance. Start now 👊

There was an important article in the Wall Street Journal over the weekend about pension funds, private equity, zombie funds, and NAV loans. The article (“Pensions Piled Into Private Equity. Now They Can’t Get Out”; linked in the comments) flags a trend where state and private pension funds, having invested billions of dollars with private equity managers, are stuck with sunk cash in the funds, continuing requirements to fund capital contributions, lackluster payouts, and demands to free up cash to pay out retiree benefits. Major takeaways are below: 👉 CALPERS (California’s state worker pension) has been paying more money into its private equity portfolio than it received for eight years in a row. 👉 Private equity funds typically have a 10 year investment period before they liquidate assets and pay out returns, but the interim estimates of fund value during that time may not be reliable, particularly because fund managers, who are paid as a percentage of the asset valuation, are incentivized to boost those valuations. 👉 The cause of the slowed distributions is the difficulty that private equity funds are having selling their companies in an environment where high interest rates have made buying and owning companies more expensive for prospective purchasers. 👉 The lack of quality exit opportunities has resulted in “zombie funds” – funds that did not pay out on the expected timetable and continue to hold illiquid assets of uncertain value. 👉 One solution to the log jam is the sale of interests in private equity funds to secondary market buyers, though often at a steep discount (Jefferies found that the discount was an average of 85% of the valuation right before the sale). 👉 Some pension funds are borrowing to access cash in order to pay distributions to retirees. I suspect such a loan would be collateralized by all assets of the pension fund, including its interests in private equity funds. 👉 In a #fundfinance angle, the article notes that The Alaska Permanent Fund has received cash distributions as a result of NAV loans taken out by the private equity funds in which it invests. But Alaska’s investment chief is not thrilled about this approach because he estimates that Alaska could borrow on its own at a lower cost than the NAV loans. As interest rates continue to remain high with no promise of near term relief and cash starved pension funds search for money to pay benefits, the opportunities for #fundfinance as a solution in this space seem likely. This could be either in the form of NAV loans to the private equity funds that are then distributed to the investors – which have their share of controversy as noted in the article – or loans to the pension funds themselves. One thing is for sure: this liquidity shortage will likely create opportunities for creative and hungry bankers to land new deals and clients.

Vodafone people, past and present - you need to read this If you have worked at Vodafone after 2010 then you likely have contributed to the Lifesight defined contribution pension scheme.  It's a decent scheme with low costs and the ability to manage your investments online - although most people tend to leave it to Lifesight. That's where the problem starts. The standard settings mean that 15 years out from your expected retirement date - when you reach your early fifties - your funds start to be moved to a "safer" mix of investments.  Less in company shares, more in cash and bonds.  This process is called lifestyling and it's long established.  But is it right for you? On average, 3 out of every 4 years sees stock market growth.  Over 5 to 10 years, the stock market has historically beaten cash and bonds.  So the question is whether locking into lower growth in your fifties - potentially your highest earning years - is really protecting you, or just costing you. Since 2015, pension freedoms have opened up alternatives to simply cashing in your pension on retirement day.  Drawdown, lump sums, flexible income - your options are much wider than the default settings assume. You can change your fund choices yourself within Lifesight.  But don't do it blind.  This isn't financial advice as I don't know your circumstances.  It's a call to action: don't let a default process determine your retirement wealth.  Please get advice, whether that's from me or someone else you trust, and take control. This will apply in principle to DC pensions from BT, EE, O2, Virgin Media and other ICT employers too - the details will vary but the message is the same.

The largest US Pension Fund just committed $800M to real estate, and it wasn't even their biggest check. CalPERS manages over $600B in AUM. It's one of the world's largest pension funds. They recently disclosed $800M in commitments: - $200M to Sculptor Real Estate Fund V - $400M in Sculptor sidecar co-investment - $200M to a BGO sidecar vehicle But the real headline is bigger. This $800M commitment was part of a $2.95B deployment in Q4 of 2025. The single largest allocation: A $2B top-up co-investment with BlackRock-owned Global Infrastructure Partners (GIP). - CalPERS committed $6.3B to real estate last year - Real assets now exceed $77B of its portfolio - Private markets make up 32% of its total portfolio - The board's pushing to increase this to 40% This is a deliberate long-term shift. CalPERS is putting more money into real assets that protect against inflation and opportunistic deals in newer sectors like data centres and cold storage. These investments give them more control, lower fees, and stronger bets on the deals they like best. How many pension funds are making the same bet?

FT-- Calpers pushes further into private equity after best results in four years Calpers reported an 11.6% gain for its latest fiscal year, its strongest performance for four years, bringing total managed assets to $556.2bn. Its PE portfolio, which makes up close to 18 per cent of the fund, delivered a return of 14.3 per cent, up from 10.9 per cent the previous year and a loss of more than 2 per cent the year before. Stephen Gilmore, chief investment officer of the California Public Employees’ Retirement System, said it was “reasonable to expect our private equity exposure will continue to increase somewhat”. In March last year, Calpers increased its target private equity allocation from 13 per cent to 17 per cent.  Other investors, such as the Teachers Retirement System of Texas, lowered their target allocation to private equity last year. The average allocation to unlisted companies among US public pension funds is about 10 per cent. https://lnkd.in/gD3kv74c

Exciting times in the world of impact investing! According to The Global Impact Investing Network's latest 2023 annual survey, institutions are driving significant capital flows into impact investments. Pension funds, in particular, are leading the charge as the largest single source of capital for impact investment managers, representing 20% of capital flows towards impact funds. This trend shows no signs of slowing down. Two announcements this week: - Hassana Investment Company, the investment manager of Saudi Arabia's General Organization for Social Insurance is investing $1.5 billion in TPG’s Climate Platform - CalPERS, the largest public pension plan in the US, announced it will allocate more than $25 billion to green private markets over the next six years. The pension plan has committed to doubling its climate investments to $100 billion by 2030. These two institutions join the New York State Common Retirement Fund and CalSTRs who are also doubling down on green assets. #impactinvesting #sustainability #GreenInvestments #EnergyTransition #ClimateAction #InstitutionalInvestors #RenewableEnergy