DC Investment strategies

These are exciting times for DC investors. The government’s agenda of ‘Freedom and choice’ gives DC members much more control of how they want to generate and manage their retirement income.

Strategies for the growth phase

Strategies for the ‘growth phase’

A DC investor in their early and middle earning years is likely to be seeking investment options that can help them grow their long-term retirement savings

Multi-asset funds

Multi-asset funds provide diversified exposure to a broad range of markets. By investing in a range of asset classes, countries, sectors and currencies, investors can avoid having a concentrated exposure to any one driver of returns.

Read more about Multi-asset funds

Future World Fund

The Future World Fund is designed for pension schemes looking for an alternative to a traditional index strategy, while also addressing the long-term financial risks of climate change. Index funds offer investors low-cost access to a wide variety of different strategies and asset classes, with the added benefits of simplicity, liquidity and ease of implementation.

Read more about Future World Fund

Risks

Investing in financial markets exposes investors to risk. These Funds invests in a wide range of asset classes, predominantly equities and fixed income, typically by investing in other funds. Equities (shares of companies) have a higher risk of being volatile (ie going up and down) than most other asset types, particularly in the short term. The Fund’s fixed income exposure – usually corporate and government bonds – is particularly sensitive to trends in interest rate movements.

The value of the Fund’s exposure to this asset class is likely to fall when these interest rates rise (such falls may be more pronounced in a low nominal interest rate environment). The financial strength of a company or government issuing a fixed interest security determines their ability to make some or all of the payments due. If this financial strength weakens, the chances of them not making payments increases and this will reduce the value of the Fund’s exposure.

The Fund may also may hold assets in currencies that are not denominated in sterling. If the value of these currencies falls compared to sterling this may cause the Fund’s value to go down. While the Fund’s broad diversification aims to lower risk, each asset class has risks that may impact the value of the Fund. Any objective or target will be treated as a target only and should not be considered as an assurance or guarantee of performance of the Fund or any part of it.

Investors may receive less income through drawdown than if they had bought an annuity. They will not benefit from the security of a guaranteed income for life that an annuity offers.

The value of the Fund can go down as well as up. Additionally, the value of an individual’s investment in the Fund will be depleted by the charges levied by the Fund, any redemptions made to draw down a retirement income and any increases in the rate of inflation. These factors could reduce either the level of retirement income that an individual can draw down or indeed the length of time for which that level of retirement income can be drawn down.

The recommended minimum expected holding period is 5 years.

Further details (including relevant risk factors and fund specific risks) are available in the Description of Funds document, which can be obtained from your usual LGIM contact.

Disclaimer

This content is produced by Legal & General Investment Management Limited. It is for the exclusive use of the recipient and is neither directed to, nor intended for distribution or use by, any person or entity who is a citizen or resident of, or located in, any locality, state, country or jurisdiction where distribution, publication, availability or use of this content would be contrary to law or regulation.

This content is provided for information purposes only and does not constitute an offer or a recommendation to buy or sell securities or financial instruments. It is not intended to be a substitute for the full documentation of the Fund.

Legal and General Assurance (Pensions Management) Limited (“PMC”) is a life insurance company and carries on the business using a linked policy. It is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The policy is divided into a number of sections (“the Funds”).

Legal & General Investment Management is authorised and regulated by the Financial Conduct Authority. It provides investment and marketing services to PMC.