How a 25% improvement in expected returns could be achieved by consolidating in a Defined Benefit (DB) master trust
Citrus DB master trust is a consolidation arrangement, whereby a DB scheme is managed alongside other schemes within a single trust. Under this approach each employer has its own section of the trust, which is managed on a segmented basis. The advantage to schemes and sponsors is that actuarial and investment consulting, governance and risk management capabilities can be improved, as well as costs being reduced. This is achieved through having a range of common investment funds, pooling assets across schemes, and sharing services such as scheme administration.
Citrus DB master trust embraces a resilient funding and investment strategy, making use of the latest funds and innovations to enhance capital efficiency - essentially making the scheme’s assets work harder and providing better value for money. The resulting portfolio generates significant and regular income which, combined with Citrus’s own asset management system, reduces transaction costs and helps to manage cashflow-related risks.
A larger pool of assets means Citrus can access best-in-class managers and funds which smaller schemes struggle to invest in on a standalone basis due to minimum investment sizes or costs of investing – including private debt and infrastructure. Investment strategies within the Citrus DB master trust are tailored to the needs of individual sections, based on the objectives agreed with each employer, and will evolve as schemes’ circumstances and market conditions change. On average, a participating scheme could expect a c25% improvement in the expected return for each unit of investment risk taken – a very material improvement for both employers and members.
Scheme consolidation can provide economies of scale, wider investment opportunities and better governance for pension schemes. There are many benefits of moving to a master trust but it is important to do thorough research and due diligence to make sure it is the right solution for your scheme.
For more information on DB master trusts and how Citrus could help your scheme, please contact us.