Fidelity International is to integrate private assets into its £16.9bn FutureWise default investment strategy for UK-based workplace pension schemes.
The move means FutureWise will become the first investor in Fidelity’s newly launched Long-Term Asset Fund (LTAF), which received regulatory approval in August.
Integration into Fidelity’s Diversified Private Assets LTAF will begin in 2025 as the fund launches, with plans to increase exposure gradually to the LTAF over three years, until reaching “a target allocation of 15%” invested in private markets assets in its growth phase.
The move will provide a new set of investment opportunities, aiming to enhance diversification, improve risk-adjusted returns and improve the overall member outcome, Fidelity said in a statement.
The LTAF is targeting investments in multiple private asset classes, globally, and including private equity, private credit, infrastructure, real estate and natural capital.
Stuart Warner, global head of platform solutions at Fidelity International, said: “Fidelity International is a large pension provider in the UK with over 700,000 [defined contribution] DC members. Incorporating private assets into our default strategy is a significant milestone for members as they save for retirement..”
He added: “The pensions adequacy gap is very real and will create significant retirement issues for individuals over the coming decades if we do not address and enhance overall member outcomes. For our DC members whose investment horizon is measured in decades not years, we believe there is strong alignment in the benefits of private market investments and member objectives.”
James Monk, investment director for FutureWise, said: “We’re selecting the best quality assets in the private markets sphere and as a result we expect this 15% allocation to have an improved growth expection of close to 0.5% net of fees.”
Fidelity usually expects rates of return of between 8% to 11% from its LTAF, he added.
Dan Smith, head of workplace investing at Fidelity International, said: “Incorporating Fidelity’s LTAF within FutureWise’s strategy will create new investment opportunities, broadening the range of assets that members are exposed to. We believe this will help to improve risk-adjusted returns and long-term outcomes for our members, within a robust and sustainable governance framework.
“FutureWise’s development from a Lifestyle to a Target Date Fund structure in recent years has resulted in considerable growth for the strategy and helped to enhance member outcomes. The integration of private assets as part of its strategy marks the latest stage of its evolution.”
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