For immediate release: The People’s Pension invest in “adaptive cap” to risk manage exposures to large companies
The People’s Pension1 has taken further steps to ensure its members get the best possible returns on their savings by investing in the World Adaptive Capping Equity Index, referred to as “adaptive cap”, through State Street Global Advisors Limited.
The index sets a limit on the size of the investment in a single holding within the fund, to reduce exposure to the biggest companies and seeks to improve diversification by increasing the exposure to smaller holdings. This reduces the concentration of members’ holdings with individual companies, reducing the effect that any one company event may have on their returns.
For example, as a result of investing in the adaptive cap, The People’s Pension is significantly reducing its holdings in five super companies within its North American portfolio, shifting its exposure to them from 15 per cent to 2 per cent. The People’s Pension is moving away from market capitalisation weighted equities, also known as “passive” funds. These funds buy equities weighted by the size of the company’s values making it more exposed to the very largest companies.
Commenting on the change, Nico Aspinall, the chief investment officer of B&CE, provider of The People’s Pension, said:
“By investing in the World Adaptive Capping Equity Index, we are continuing to improve the risk-return profile of members’ portfolios and reducing the reliance we have on a small number of companies.
”We see this change as a part of our continued evolution of the portfolio and the hallmark of good trustee governance available from a large master trust.”
Jenny Yoe, head of institutional business for the UK and Ireland at State Street Global Advisors said:
“State Street Global Advisors values the strong partnership we have with The People’s Pension and we believe our smart beta approach is an important addition in evolving the investment proposition. We are seeing strong interest from UK clients in smart beta and believe increasing diversification and reducing risk offers clear benefits to clients in a transparent, cost efficient manner.”
Notes to Editor:
- The People’s Pension is a leading, not-for-profit, auto-enrolment pension scheme, with more than 4 million members from 88,000 employers and more than £7bn assets under management. We tweet as @peoplespension.