The AXA UK Group Pension Scheme’s recently published Trustee’s Annual Report and Financial Statements for the Year Ended 31 March 2025 outlines significant changes in its investment strategy, focusing on increasing green asset exposure and enhancing portfolio diversification.
Strategic Asset Allocation Adjustments for Fiscal Year 2025
For the fiscal year ended March 31, 2025, the Scheme made several adjustments to its investment portfolio. These changes were driven by a desire to increase the proportion of assets invested in green assets, improve ESG characteristics, and enhance diversification and liquidity. The overall objective is to move towards a low-risk cash flow matching portfolio while managing volatility and improving operational efficiency (page 9, 19).
Specifically, the Scheme’s asset allocation as of March 31, 2025, compared to March 31, 2024, shows the following shifts (page 17):
* LDI and Overlay Strategies: Decreased from £1,225 million to £1,029 million.
* Liquid and Semi-Liquid Strategies: Remained stable at £1,424 million.
* Illiquid Credit Strategies: Decreased from £954 million to £821 million.
* Illiquid Market Strategies: Increased from £19 million to £32 million.
These changes reflect a strategic move to reduce the total proportion of Scheme assets invested in illiquid assets to below the limit of 40% (page 19, 23).
New Asset Class Considerations and Allocations
In line with its updated investment strategy, the Scheme made several new allocations and strategic explorations during the reporting period (page 19):
* Next Energy UK ESG Fund: In June 2024, the Trustee invested in this fund to increase the proportion of the Scheme’s assets in green assets, aligning with its ESG targets. The Scheme achieved its target green investment exposure of 1% a year ahead of schedule due to investments in the Infrastructure Fund, and this proportion is expected to increase further (page 26).
* AXA IM Asset Backed Securitised Fund: In September 2024, an investment was made into this fund, which complies with Article 8 of EU SFDR, to improve the ESG characteristics of the Scheme’s securitised asset allocation.
* Man Group Alternative Risk Premia Fund: In January 2025, an investment was made into this fund to support the diversification and liquidity of the Scheme’s investment portfolio.
Additionally, an Asset Liability Management (ALM) study will be undertaken in 2025 to define the Scheme’s future asset allocation, balancing risk/reward characteristics to support its full funding objective (page 19).
Manager Appointments and Disinvestments
The Scheme appointed new managers and made disinvestments to align with its evolving strategy (page 4, 19):
* MAN Asset Management Limited: Appointed on January 23, 2025.
* Next Energy Capital Limited: Appointed on May 17, 2024.
* AXA Investment Managers Paris: Appointed on July 29, 2024.
Disinvestments were made from AXA IM Global Secured Assets and AXA IM Alternative Credit Funds to improve liquidity within the Scheme and reduce illiquid asset exposure (page 19). During the year, there was investment into pooled investment vehicles with Man Group, Next Energy, and AXA IM of £40 million, £17.8 million, and £149 million, respectively. Disinvestments were made from AXA IM Global Assets Secured fund (£102 million), AXA IM ACF (£61 million), Alliance Bernstein Transition Loans (£15 million), and AXA IM Infrastructure Debt (£39 million) (page 46).
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