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 different assets (investments).

Further investment through Investec (our main investment manager), saw our holdings in UK listed equities, corporate bonds and government gilts surpass £55 million (at the end of 2019).

We also continue to increase overseas exposure and added to the Fidelity Emerging Markets fund and the Fidelity Global Special Situations fund.

The Emerging Markets fund invests primarily in countries experiencing rapid economic growth whilst the Global Special Situations fund identifies global companies with significant potential for share price appreciation.

As part of our ongoing diversification strategy we took the decision to invest into the Fidelity Global Strategic Bond fund, which includes overseas government and corporate bonds and aims to provide strong return whilst providing the assurance given by investing in fixed interest.

Our property portfolio

Investment in commercial property is a longstanding differentiator for Sheffield Mutual, which, due to the stable rental income received has enabled us to continue to pay bonuses in years where risk seeking assets have under-performed. At the end of 2019, our property portfolio was valued at over £40 million. As you can see from the pie charts, we intentionally hold a higher number if properties local to the Society within the Yorkshire and Humber and the North West regions. We also have a variety of tenants, ensuring that we are not overly reliant on any one sector.

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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