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. Over recent years the Society has aimed to diversify its investment portfolio in several ways. The initial part of the strategy was to reduce our reliance on one investment manager and looked to invest with fund managers. The funds we chose, such as the Emerging Markets fund, were best in class in terms of performance but also gained us access to specialist knowledge in those fields.

Investing in overseas markets also reduced exposure purely to fluctuations within UK markets. In December 2021 we took the next step on this journey in appointing Russell Investments as our Outsourced Chief Investment Officers (OCIO) to further diversify in terms of investment managers and asset classes, lessening the impact of market volatility.

Prior to the appointment, further investments were made into the Society’s existing holdings in line with the Society’s business plan, with funds under management at Investec reaching almost £62m, consisting of UK listed equities, corporate bonds, government gilts and alternative assets. 

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

We continue to have a strong interest in directly held commercial property. Rental returns provide a consistent income to pay for day-to-day costs, but this also feeds through into the overall investment return. We hold a strong geographical spread of properties, which are tenanted by small and large organisations. The strategy of purchasing property as part of our asset mix began in the early 1980’s, when we purchased a charity shop and travel agents (which we still own). This strategy has evolved over time but is still part of our investment approach, as demonstrated by recent purchases including an autocentre and multi-tenanted industrial units.

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.

Let's keep in touch

Keep up to date with news, offers, competitions and other products and services that we offer via email

Please only include first and last name