Responsible investment will be vital for the next generation of pension investors

Joe Creegan, Head of Corporate Life and Pensions, Zurich

For pension investors the most important metric is the growth in their investment over the long-term. Stellar performance over a year or two pales into insignificance when set against an investment term of thirty years or more. In the highly competitive employee recruitment and retention environment, providing a high performing company pension is a strong calling card for prospective employers.

One of the most topical discussion points in the employee pensions market at the moment is ‘Responsible Investment’. At Zurich, we see Responsible Investment as an overarching set of principles, with ESG (Environmental, Social and Governance) investing being a subset.

At Zurich, we believe that employers, trustees and advisors can use the concept of responsible investment in a number of ways to engage, connect and appeal to a younger workforce – essential if we are to ensure that future generations have a sufficient pension fund to provide an adequate retirement income.

It appears that ESG investing is here to stay. However, it can be hard to identify exactly what it means and how investment managers can incorporate a process into not only specific existing funds, but also into their overarching house philosophy and style of investing. For example, most active investment managers will rightly argue that taking into account social and governance factors is just part of being a prudent investment manager, but may have concerns about the economic impact of excluding or minimising exposure to certain sectors of the market, which may still be profitable and therefore ‘good’ investments. At the other end of the scale are index tracking funds or passive investment management; whilst they can have an ESG strategy, they are somewhat compelled to buy the stocks that are part of their benchmark/index – excluding metrics other than market capitalisation, or company size.

Our active investment management has served our customers well with Zurich’s Balanced managed fund having delivered 10% per annum average growth over the past thirty years. That is significantly better than the average fund manager in the market. Last year Zurich were the best performer in multi-asset funds and the Rubicon Survey put us first over the past three and five years as well.

That performance is in turn a result of the experience and expertise of the Zurich investment team, which has a strong track record in Ireland for more than forty years. Our investment process has remained essentially the same throughout that period. We have seen enhancements over the years, for example the introduction of the ESG strategy, discussed above, but the core process is the same.

That process is based on an active management strategy. At Zurich, active management is at the core of our business and our goal is to add value through expertise and take advantage of opportunities by utilising a disciplined and flexible approach.

Employers choose Zurich for the consistent out performance of our funds and the strength of our investment team. Zurich is one of the largest insurance companies in the world with an AA- credit rating*. Many of our clients choose a bundled arrangement where we offer investment management, scheme management, administration, employee engagement and in some cases trustee services through Zurich Trustee Services Limited (ZTSL).

We are likely to see the introduction of a national auto-enrolment scheme in the early part of the decade. In theory this will be good for private sector employees who don’t have a supplementary private pension arrangement. However, to deliver better outcomes for their employees and support retention, the best solution is to ensure that employers have a pension scheme in place now with adequate contribution levels and out performing investment funds.