Our investment beliefs form our core investment philosophy, combining to provide Railpen with a reference point that runs through everything we do, from giving strategic advice to the Trustee to managing assets day-to-day on behalf of the railways pensions schemes.
The beliefs that shape how we pay pensions
Our core philosophy combines with the expertise of our investment managers to ensure we maintain discipline through turbulent times but that we are also able to react to risk and uncover investment opportunities and adapt to the evolving pensions landscape.
Our integrity is anchored in our investment beliefs, ensuring we’re all pulling in the same direction to secure our members’ future, while striving to have a positive impact on the communities and the world they retire into.
The vital role of our investment beliefs
Managing asset-liability risk is integral to a scheme’s long-term success...
A scheme’s ability to take on investment risk in excess of the minimum risk inherent in its liabilities is finite. Railpen’s mandate is to advise on and manage this investment risk on behalf of the Trustee to deliver sufficient long-term returns from the assets to meet the schemes’ liabilities over a range of environments.
To achieve this, Railpen focuses on a small number of asset-liability risk drivers that can really impact a scheme. We then closely manage them, ensuring risk and success measures are able to support good long-term focused investment decision making.
Our strategy
Our integrated approach focuses on long‑term resilience, informed risk management, and delivering sustainable outcomes for members and employers.
How we set the DB investment strategy
Railpen is responsible for the strategic advice, implementation, and investment management of four pension schemes, for which the Trustee has fiduciary responsibility. The Railways Pension Scheme is the largest of the four and one of the largest pension schemes in the UK.
We manage around £34 billion in assets; over 95% of these are in defined benefit (DB) arrangements across nearly 150 clients – the different 'sections' of the schemes, each with its own assets and liabilities and therefore its own investment, funding, and contribution strategy. The remainder is in defined contribution (DC) arrangements.
How we manage DC assets
We manage the assets within the defined contribution section of the Railways Pension Scheme - the Industry-Wide Defined Contribution (IWDC) arrangement. Members are offered a number of self-select funds (with various risk-return characteristics) and lifestyle strategies (including a default option). The funds cover a range of member preferences, with the lifestyle strategy choices that gradually transition investments from higher-risk funds into funds aiming to reduce the risk of significant drawdown as retirement approaches.
Our scale is a key advantage, allowing access to similar investments as our DB pooled funds where this is appropriate. This allows exposure to more illiquid asset classes and well-diversified, multi-asset investment strategies.
How we implement our strategy
We combine tailored needs with the power of our pooled approach to deliver stronger outcomes.
Delivering our investment strategies
Our collaborative relationships with our clients flow from our investment beliefs and continue into implementation and beyond – recognising that situations and needs change, and an element of flexibility can often add value.
When considering the structure and mandates for how a client's assets are invested in line with the strategy we shape with them, we apply a number of criteria that have been established with the Trustee:
The ability to tailor investment strategies to a range of different section needs.
The need to efficiently exploit the collective advantages of the schemes.
To ensure we provide sufficient coverage of the asset universe.
That we support a robust investment risk management process.
That our key performance indicators are aligned to sections’ success and risk outcomes.
Client assets are invested into co-mingled and unitised pooled funds. This allows us to exploit the collective advantages of the schemes – scale and stability of assets, time horizon, liquidity and cashflow profile.
However, we try to maintain the smallest number of pooled funds possible that allow us to tailor exposures to client needs while continuing to capitalise on the collective advantages.
Learn more about the TrusteeImplementation shaped by our beliefs
Investing for the long term
The majority of our sponsoring employers assets are invested using a multi-asset approach which can be across groups of assets, such as private markets and secure income, or more broadly across many different types of assets.
Railpen’s multi-asset approach focuses on the desired risk-return characteristics needed in different elements of the strategy, rather than being overly precise at a granular level. This approach us to allocate capital to opportunities in good time, without compromising overall investment and funding strategy.
Flexible in implementation
Railpen's ability to be flexible in implementation demonstrates the importance we place on ensuring that investment decisions are aligned to our sponsoring employer's long-term objectives.
Our integrated risk governance and management processes promote collaborative, aligned behaviours with an appropriate amount of independence to ensure the employer’s voice is heard in investment decision making. Mandates are generally focused on the required investment risk profile and long-term returns needed, rather than on beating a benchmark.