News analysis: The statement of investment principles laid out by Heineken for its contract-based defined contribution scheme includes its governance committee’s investment beliefs, their working practices and the funds on offer to members.
The document, the creation of which Pensions Week reported last week, has been heralded by industry experts as a step forward for contract-based schemes
The SIP – modelled on trust-based scheme best practice – sets out its risk attitude, investment objectives and beliefs, and how the investments are monitored.
“The governance committee has developed its investment strategy based on its belief in diversifying investment risks and that active investment managers can add value in certain areas,” said the statement.
The investment beliefs include:
that there should be diversification in the growth phase;
equities and other risk assets will outperform bonds;
members should move into less volatile assets as they approach retirement;
the fund range will be largely index-tracking;
diversified growth managers add significant value and reduce volatility.
Steve Carrodus, director at Pitmans Trustees, said: “I am not aware of any other single-employer contract scheme that has done this [kind of statement]. It makes a lot of sense to mirror what the trust-based schemes are doing and have the same investment principles,” he added.
In an attempt to “provide members with a range of investments that are suitable for meeting their objectives”, the statement details the ingredients of its default balanced fund, as well as other core funds for the more hands-on member.
“In assessing the fund range, the committee has taken into account its understanding of members’ circumstances and in particular members’ attitudes to risk and the anticipated term to retirement,” the document stated.
The SIP tells members that the governance committee meets quarterly to assess areas such as:
the underlying member profile;
the performance and risk of all major funds;
continual adjustments to industry best practice.
Investment options are reviewed “not less than once a year”, and members are kept informed with an annual newsletter.
“It goes further than a SIP generally would and covers loosely the objectives of the committee for broader issues in addition to pure investment. If only more schemes were run this way,” said Lee Hollingworth, head of DC consulting at Hymans Robertson.
