Our with profits fund
At Sheffield Mutual, we generate investment returns for our policyholders through our with-profits fund. But what exactly is a with-profits fund and where do we invest our members' money?
What is a with-profits fund?
A with-profits fund is a way for members of a friendly society like Sheffield Mutual to pool their money together into a single pot. The money from this pot is then invested in a diverse range of products, including property, shares, cash and government gilts.
We have selected our investments carefully, and designed our with-profits fund to provide a medium to low risk investment profile, perfect for members who want to take a more cautious approach to investing their money.
In addition to our low-to-medium risk investment profile, we aim to deliver even more reliable returns through a process called smoothing.
What is smoothing?
‘Smoothing’ is a process that enables us to provide even more stable returns to our members, even during periods of economic difficulty.
Put simply, when the economy is strong and we have a surplus of profits, we will hold some of that money back. Then, during periods of economic difficulty, we can use this saved surplus to top up our members’ bonuses, ‘smoothing’ the impact of an economic downturn on their investments.
Where we invest your money…
Our with-profits fund has been designed to provide our members with a way of investing that aims to maximise profit while minimising risk.
We’ve achieved this by investing in a diverse portfolio of products and funds, removing our reliance on any individual investment manager by spreading our investments across multiple fund managers.
In addition to diversifying the products we invest in, we have also diversified the markets we invest in by expanding into new geographies.
By investing in overseas markets, we can minimise the impact of UK-specific fluctuations, aiming to provide our members with stable investments even during periods of local economic uncertainty.
Who manages the with-profits fund?
Previously, Sheffield Mutual’s funds were held under management at Investec, reaching almost £62m in value and comprising UK-listed equities, corporate bonds, government gilts, and other assets.
Then, in December 2021, Sheffield Mutual appointed Russell Investments as our Outsourced Chief Investment Officers (OCIO). This move was designed to further diversify our holdings across investment managers and asset classes, reducing the impact of market volatility.
Since then, we’ve gone from strength to strength and, as of December 2024, the fund value had increased to almost £166m.
Our ESG Principles
ESG stands for Environmental, Social and Governance Principles, and represents a way of investing focused on making a profit without investing in potentially harmful industries.
This means that Sheffield Mutual does not invest knowingly in industries such as tobacco, armaments, gambling or pornography, and we have also disinvested from our positions in the oil and gas industry.
At Sheffield Mutual, we aim to keep our ESG score (per the Sustainalytics independent rating system which considers many factors such as carbon footprint, human rights, resource use and corporate governance) at least 5% below UK equity market average score, as well as avoiding any investments which hold a ‘severe’ ESG score, which could indicate investment in potentially damaging industries.
Our property portfolio
At Sheffield Mutual, we have carefully selected our property portfolio to provide long-term returns rather than short-term profits, aiming to create stable income.
Our property investment journey started in the 1980s, when we purchased a travel agent and a charity shop, both of which are still part of our portfolio today.
To make our investment strategy even more robust, our property portfolio has been spread across a wide geographic range and a diverse blend of small and large organisations, allowing us to generate regular income via rental returns and keeping our day-to-day operations running smoothly.
Because we’ve selected investments to provide long-term returns, we do not need to change our investment strategy every year to chase short-term profits. Instead, we remain confident that our long-term, medium to low risk investment strategy will continue to deliver strong returns for our members for years to come.
Our investment mix does not materially change each year; it is managed for the long-term, whilst taking into account ongoing market and economic analysis.
We remain confident that our with-profits fund will continue to provide our members with highly competitive returns over the coming years.
How we manage our with-profits fund
The premiums you pay into your with-profits policy are invested in our long-term business fund. The documents listed here explain how we manage the fund and what you can expect to receive from your policy. Please find below links to our Principles and Practices of Financial Management (PPFM), the terms of reference for our with-profits advisory arrangement (responsible for with-profits governance) and our most recent annual report to with-profits policyholders (outlining our compliance with the PPFM). The PPFM is a relatively complex and technical document, so please contact us if you need any assistance.