Atlas Master Trust allocates £320m to Schroders sustainable multi-factor equity strategy

Jonathan Stapleton reports...

The Atlas Master Trust has invested £320m in Schroders’ sustainable multi-factor equity (SMFE) fund.

The master trust said it has invested all of the core equity allocation within its three multi-asset portfolio funds – which form part of its standard default lifestyle strategies – into the SMFE fund.

Schroders has managed multi-factor equities for Atlas since 2017 but the scheme said it had decided to make the switch to the SMFE fund in order to incorporate ESG into its lifestyle strategies and meet members’ growing demand to invest their pension savings more sustainably.

Atlas Master Trust investment subcommittee chairman Paul Trickett explained: “We felt this was a move about which the membership would be positive and this would also be a net positive in terms of return generation.”

Trickett said the scheme felt the additional cost of the new strategy – which he said was a “few basis points” in terms of annual management charges and “low teens” in terms of transition costs for those already invested – was more than justified by the benefits offered.

He explained: “Many of the people invested in Atlas will be invested for a long period of time. We felt that over that period of time the small increase in cost will be more than outweighed by the potential benefits of this fund.”

The SMFE fund, launched in October last year, is based on Schroders’ global multi-factor equity strategy and aims to outperform the MSCI All-Country World Index while also incorporating scores from the firm’s proprietary sustainability framework, SustainEx.

This measures the positive and negative impacts companies place on society and the environment.

The SMFE fund also has less than half the carbon intensity of the index and excludes industries such as tobacco, weapons and gambling.

Schroders head of institutional defined contribution Tim Horne said: “Accessing robust and fully-integrated sustainable investment returns has historically proved difficult for UK DC investors. But the launch of Schroders’ SMFE fund last year gave them a clear solution to this investment challenge.”

Future developments

Trickett said the Atlas Master Trust was looking to continue developing its investment strategy in the future and was also looking at whether it could also include illiquid assets within its default structure.

“We would like to add some exposure to illiquid assets into the default fund and we continue to have regular discussions with Schroders, our partner manager, as to whether illiquidity can be structured as a factor at a cost which makes sense for a DC default fund.

“Clearly it’s a pretty complicated question – cost is a question, as is the requirement for daily trading – but we think it is likely to be possible, although it will take some time to work through.”