The DS Smith Group Pension Scheme’s recently published Annual Report for the year ended 30 April 2025 details several strategic investment changes and ongoing considerations.
Allocation Changes Reflect De-Risking and Return Optimization
For the fiscal year ended April 30, 2025, the Scheme implemented several allocation changes. In February 2025, the Scheme’s synthetic equity allocation was switched to a passively managed physical equity portfolio to reduce overall leverage costs. Also in February 2025, a portion of the Scheme’s buy and maintain investment grade credit portfolio was sold, with proceeds used to fund a new allocation to trade finance, aiming to crystallize strong returns. In March 2025, the target interest rate and inflation hedge ratios were increased from 94% to 97%, reducing exposure to interest rate and inflation risk. (Source: DS Smith Group Pension Scheme Annual Report for the year ended 30 April 2025, page 7)
Defined Contribution Section Closed, Assets Integrated into Defined Benefit Scheme
Effective April 10, 2025, the Scheme’s Defined Contribution (DC) section was closed. The DC assets, previously invested with Utmost Life and Pensions, became Scheme assets and are no longer associated with individual members. Members who were part of the DC section will now receive a Defined Benefit (DB) pension calculated by the Scheme Actuary. All funds invested with Utmost Life are scheduled to be disinvested and paid to the DB Trustee bank account in October 2025, subsequently being retained by the Scheme. (Source: DS Smith Group Pension Scheme Annual Report for the year ended 30 April 2025, page 9, 17, 33, 51)
New Manager Appointment for Working Capital
As of February 28, 2025, Allianz Global Investors UK Limited was appointed as a sub-investment manager. The firm manages the Allianz Working Capital Fund, which holds 5.0% of the Scheme’s total assets as of April 30, 2025. (Source: DS Smith Group Pension Scheme Annual Report for the year ended 30 April 2025, page 4, 25)
Ongoing De-Risking Framework Guides Investment Strategy
The Scheme continues to implement a de-risking trigger framework managed by Mercer. This framework dictates that upon reaching a designated funding level, higher-risk assets are sold and replaced with lower-risk assets to ‘lock in’ funding gains. The triggers were paused from September to November 2024 for discussions on long-term funding and investment strategy. An updated framework was introduced in November 2024, targeting a cash-flow driven investment strategy expected to yield a return of gilts + 1.5% p.a. as the Scheme’s funding level approaches 105% on a gilts + 0.5% p.a. basis. Despite funding level increases, no de-risking triggers were met during the fiscal year, leaving the target allocation among sub-portfolios unchanged. The next de-risking trigger is set at 96.0% funded on the gilts + 0.5% p.a. basis. (Source: DS Smith Group Pension Scheme Annual Report for the year ended 30 April 2025, page 7)
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