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?

When you invest with us, we pool your money together with other members in the with-profits fund. This is then invested in assets like commercial property, shares, fixed interest, cash, bonds and government gilts. Our with-profits fund is managed to provide a low to medium risk investment, appealing to individuals with a more cautious approach to investing.

With-profits aims to offer a better return than a typical bank or building society account but is not as risky as investing all your money directly in the stock market as we ‘smooth’ returns (more on that later!). 

Where we invest your money…

Our with-profits fund is built upon a cautious approach to investing within a diverse range of asset classes. The Society’s overseas exposure was increased throughout 2020, with further investments into the Fidelity Global Strategic Bond fund, which targets a mix of global government and corporate bonds to ensure that a strong yield is achieved with the assurance of investing within the fixed interest sector.

Additional investments were also made throughout the year into the Fidelity Emerging Markets fund, and the Fidelity Global Special Situations fund, which have both provided several years of strong returns for the Society, as well as diversified the with-profits fund to reduce reliance on the UK market.

Additional investments made through Investec, our main investment manager, saw our holdings of UK listed equities, corporate bonds, and government gilts reach £58m. The extensive knowledge and expertise provided by Investec, as well as their proactive management, allow the Society to plan ahead for future investments.

The ‘E’ in ESG

Over many years the Society has aimed not to invest knowingly or directly in industries relating to armaments, tobacco, gambling or pornography. We have also now disinvested from our equity holdings in the oil and gas sector.

The Society's ESG score (per the Sustainalytics independent rating system which considers many factors such as carbon footprint, human rights, resource use and corporate governance) is targeted to be maintained at least 5% below the UK equity market average score. The Society also aims not to hold any individual equity holdings with a 'severe' ESG risk score.

Our property portfolio

The Society’s investment within the commercial property sector is our longstanding unique selling point, which has supported our consistent returns and bonus payments over the years due to the stable element of the rental income received. The Society’s property portfolio, which is valued at over £41m, has a strong mix of tenants in a variety of different sectors, which helps to minimise reliance on any one sector. Similarly, this can also be evidenced in the geographical weighting of the property portfolio. Despite having a slight bias towards our Yorkshire heartland and the north, the Society hold properties across the whole of the UK.

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.

What is smoothing?

A particular feature of with-profits is ‘smoothing’. This is the process where we hold back some surplus profit in good years so we can top up policy bonuses in years where the performance is not as good. Smoothing aims to even out the short-term ups-and-downs that is often associated when investing directly in the stock market and has enabled the us to maintain stable bonus rates even in volatile markets.

How we manage our with-profits fund

The premiums you pay in to your with-profits policy are invested in our long-term business fund. These documents explain how we manage the fund and what you might expect to get back 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.

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