Aegon has announced plans to update its largest workplace default fund with new private market investment and enhanced environmental, social and governance (ESG) integration.

The £12bn Universal Balanced Collection fund currently has more than 700,000 members invested in it.

The fund updates will take place from the third quarter of 2024 and aim to target improved outcomes for invested members, better risk-adjusted returns and value for money.

Aegon said it will offer access to a wider range of responsible investment opportunities, seeking to enhance diversification and provide access to investment opportunities that have “historically been harder” for workplace savers to access.

The fund will be available to Aegon Retirement Choices and One Retirement investors, as well as some off-platform products.

Aegon will partner with three fund managers to provide a bespoke solution for use within the Universal Balanced Collection.

BlackRock will manage a bespoke, diversified alternative private markets strategy, including private equity, private debt, real estate and infrastructure, alongside an ESG-integrated passive equities and bonds strategy with a year-on-year diversification target from Q4 2024.

Aegon Asset Management will manage a new multi-asset credit mandate, which includes global high yield, asset-backed securities and emerging market debt strategies from the second half of H2 2024.

It will also manage a private debt and alternative fixed-income fund from early 2025, subject to approval from the Financial Conduct Authority (FCA) and ‘operational considerations’.

J.P. Morgan Asset Management will manage a bespoke strategy, offering exposure to private equity, infrastructure and forestry, which is also subject to FCA approval and operational considerations, in early 2025.

The proposal is to house the private market allocations within Long-Term Asset Fund (LTAF) structures, subject to regulatory approval.

Carne Group will act as the authorised corporate director of the Aegon Asset Management and J.P. Morgan Asset Management LTAFs.

“We believe our changes will improve the growth potential of the Universal Balanced Collection and future Aegon funds that utilise these enhanced capabilities,” Aegon managing director, investment proposition, Lorna Blyth.

“The changes target robust risk management and diversification, to offer members improved outcomes and value for money.

“This bold move also aligns with our commitment to reach net-zero greenhouse gas emissions for our full range of default funds by 2050, and to a 50 per cent reduction in emissions by 2030.

“It also significantly supports our desire to invest £500m in climate solutions by 2026; investments that directly contribute to climate change mitigation and/or adaption. We expect many of these solutions to come from unlisted equities which aligns with our Mansion House Compact aim to invest at least 5 per cent of our default fund assets in unlisted equities by 2030.

"On completion of the Universal Balanced Collection changes in 2025, we anticipate that we will have moved over £30bn of default assets into funds that consider ESG factors.”

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