Andy Brown, head of fund solutions at Standard Life
Recognizing the rapidly evolving UK retirement landscape, Standard Life's fund solutions team began addressing the challenges of increasingly volatile investment markets. They were particularly concerned about the impact of this volatility, driven by a growing number of international geopolitical and economic issues, on clients' pension savings.
"As advisers already know, in a ‘Steady Eddie' environment, clients can get overconfident. They tend to expect investments to perform very well and to continue performing at that level. However, something unexpected could come along to turn strong performance upside down, such as a market-shifting event," says Andy Brown, who heads up the Fund Solutions function at Standard Life.
According to Brown, the impact of market volatility on a portfolio is heightened when people are either close to or in retirement, mainly because their investments won't have as much time to recover from any losses.
As a result, clients in these two groups are also more likely to feel uncomfortable with seeing daily fluctuations in their plan valuations. This prompted Brown and his team to explore potential new solutions for pre- and at-retirement clients, and their advisers.
The Standard Life Smoothed Return Pension Fund was developed to meet the needs of clients with a lower- to moderate-risk appetite who don't want to see the impact of daily market fluctuations on their investments.
"It's the shorter-term daily market fluctuations that the fund aims to smooth out – we can't fully smooth out an event like another global financial crisis, as no one would be able to do that," adds Brown. "What we can do is ensure the variation on the returns are squeezed into a very narrow band – as narrow as possible – and that's what our smoothing mechanism attempts to do."
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