Asset management update

22 June 2021

LifeSight chooses the Fallen Angels fund

In the LifeSight pension schemes, participants accrue an investment capital for income at retirement. If a participant invests via the Smart Standard or has opted for Smart Investing or the Pension Stabiliser, then the capital is invested by LifeSight. We then also choose the asset managers.

At the end of March 2021, we made a change to the investments in high yield bonds in the LifeSight Return fund. The investment in the LGIM Global High Yield fund has been replaced by the BNY Mellon Efficient U.S. Fallen Angels Beta fund. In this news item, you can read more about this fund.

This news item is not relevant for participants who have opted for Self Investing or the Pension Stabiliser. Because these participants do not invest in the LifeSight Return fund.

What exactly will change?

The LifeSight Return fund invests in a basket of various investment funds with the aim of achieving a good return at an acceptable risk. We choose the best asset managers to manage the pension money of our participants. Investments are made in equities, listed real estate, emerging market bonds, corporate bonds and high yield bonds. Every year LifeSight checks whether the distribution between the various investments needs to be adjusted on the basis of the current return expectations. LifeSight also assesses whether the selected asset managers are still performing well. By doing this, we try to achieve the best results for our participants.

Fallen Angels are high yield bonds issued by companies whose credit ratings recently have been downgraded. This reduction has forced a number of investors to sell these bonds because the rating does no longer match their investment guidelines. The Fallen Angels fund can therefore, often buy these bonds at attractive prices. This provides an attractive annual interest rate. If the credit rating of the company will improve again, then the bond can be sold at a good price. All together, this can yield a nice return in a number of years.

The Fallen Angels fund looks carefully at why the creditworthiness of a company has been lowered. If this is due to fraud, for example, then the company will not be included in the Fallen Angels fund. With this, the asset manager tries to reduce the risk of a negative result.

Why this change?

The Covid-19 virus caused uncertainty in the financial markets and more debt to companies. As a result, the creditworthiness of several companies has been lowered or is expected to be lowered in the near future. As a result, there will be more opportunities to invest in Fallen Angels bonds in the coming period. Therefore, now is a good time for LifeSight to make the switch.

In addition, the Fallen Angels fund fits better in LifeSight’s sustainability policy. The investments within the Fallen Angels fund are assessed on various ESG criteria. It also excludes companies that produce controversial weapons or rely largely on the extraction of tar sands and coal for revenue. Click here for more information about sustainable investing by LifeSight.

What does this change mean for our participants?

We have automatically implemented the adjustment in the Return fund. So participants don’t have to do anything themselves. The asset management costs of the Return fund will not change.

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