Fidelity International Enhances FutureWise with Private Assets Integration

Fidelity International is set to incorporate private assets into its £16.9 billion FutureWise default investment strategy, designed for workplace pension schemes in the UK. This strategic enhancement marks a significant milestone in how Fidelity approaches retirement savings for its members.

First Investor in New Long-Term Asset Fund

As part of this initiative, FutureWise will become the inaugural investor in Fidelity’s newly established Long-Term Asset Fund (LTAF), which received regulatory green light in August. The integration of assets into Fidelity’s Diversified Private Assets LTAF is scheduled to commence in 2025, coinciding with the fund’s launch. The strategy will gradually increase exposure to the LTAF over a three-year period, ultimately aiming for a target allocation of 15% in private market assets within its growth phase.

Enhancing Diversification and Returns

This strategic move is anticipated to unlock a plethora of investment opportunities, with a focus on enhancing diversification and optimizing risk-adjusted returns, ultimately benefiting members. The LTAF aims to tap into various private asset classes worldwide, including private equity, private credit, infrastructure, real estate, and natural capital.

Commitment to Member Outcomes

Stuart Warner, Global Head of Platform Solutions at Fidelity International, emphasized the significance of this development, noting that Fidelity serves a substantial number of UK pension members—over 700,000 defined contribution members. He stated, “Incorporating private assets into our default strategy is a significant milestone for members as they save for retirement.” Warner also pointed out the pressing issue of pension adequacy, highlighting the potential challenges individuals may face in the coming decades if these matters are not addressed.

Focus on Quality Assets and Growth Expectations

James Monk, Investment Director for FutureWise, shared insights on the approach to asset selection, mentioning, “We’re selecting the best quality assets in the private markets sphere, and as a result, we expect this 15% allocation to have an improved growth expectation of close to 0.5% net of fees.” Generally, Fidelity anticipates returns ranging from 8% to 11% from its LTAF.

Broadening Investment Horizons

Dan Smith, Head of Workplace Investing at Fidelity International, discussed the impact of integrating the LTAF into the FutureWise strategy, stating, “This will create new investment opportunities, broadening the range of assets that members are exposed to. We believe this will improve risk-adjusted returns and long-term outcomes for our members, all while adhering to a robust and sustainable governance framework.”

He further revealed that FutureWise has evolved from a Lifestyle to a Target Date Fund structure in recent years, which has contributed significantly to its growth and improved member outcomes. The addition of private assets within its strategy represents a pivotal moment in this ongoing evolution.