Statement of Investment Principles for the
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Taylor & Francis Group Pension & Life Assurance
SchemeEffective from 31 March 2023
1.

Introduction

This Statement of Investment Principles (“SIP”) sets out the policy of the Trustees of the Taylor &Francis Group Pension & Life Assurance Scheme (“the Trustees”) on various matters governing
decisions about the investments of the Taylor & Francis Group Pension & Life Assurance Scheme(“the Scheme”), a Defined Benefit (“DB”) Scheme. This SIP replaces the previous SIP dated July 2019.
The SIP is designed to meet the requirements of Section 35 (as amended) of the Pensions Act 1995(“the Act”), and the Occupational Pension Schemes (Investment) Regulations 2005 (as amended) and
the Pension Regulator’s guidance for defined benefit pension schemes (issued March 2017, as
amended).
This SIP has been prepared after obtaining and considering written professional advice from Lane Clark& Peacock LLP (“LCP”), the Scheme’s investment adviser, whom the Trustees believe to be suitably
qualified and experienced to provide such advice. The advice takes into account the suitability ofinvestments including the need for diversification, given the circumstances of the Scheme, and theprinciples contained in this SIP. The Trustees have consulted with the relevant employer in producing
this SIP.
The Trustees will review this SIP from time to time and, with the help of their advisers, will amend it asappropriate. These reviews will take place as soon as practicable after any significant change ininvestment policy and at least once every three years.
•

Appendix 1 sets out details of the Scheme’s investment governance structure, including key
responsibilities of the Trustees, investment advisers and investment managers. It also
contains a description of the basis of remuneration of the investment adviser and theinvestment managers.

•

Appendix 2 sets out the Trustees’ policy towards risk appetite, capacity, measurement andmanagement.

2.

Investment objectives

The Trustees’ primary objectives are that:▪

the Scheme should be able to meet benefit payments as they fall due; and▪

that the Scheme’s funding position (ie the value of its assets relative to the assessed value of its
liabilities) should remain at an appropriate level. The Trustees are aware that there are various
measures of funding, and have given due weight to those considered most relevant to the
Scheme.

3.

Investment strategy

The Trustees, with the help of their advisers and in consultation with the employer, reviews the
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Scheme’s investment strategy from time to time, taking into account the objectives described in Section
2 above.
Following a review, the Trustees have agreed that the investment strategy of the Scheme should bebased on the allocation below.
Asset class

Strategic allocation(%)

Equities

12.5

Diversified Growth

12.5

UK Property

10.0

Liquid Credit

25.0

LDI and Liquidity

40.0

Total

100.0

The Trustees monitor the asset allocation from time to time. If material deviations from the strategic
allocation occur, the Trustees will consider with their advisers whether it is appropriate to rebalance theassets, taking into account factors such as market conditions and anticipated future cash flows.
4.

Considerations made in setting the investment arrangements

When deciding how to invest the Scheme’s assets, the Trustees consider a number of risks, including,but not limited to, those set out in Appendix 2. Some of these risks are more quantifiable than others,
but the Trustees have tried to allow for the relative importance and magnitude of each risk.
The Trustees considered a wide range of asset classes for investment, and the expected returns andrisks associated with those asset classes.
In setting the strategy the Trustees considered:▪

the Scheme’s investment objectives;▪

the best interests of members and beneficiaries;▪

the circumstances of the Scheme, including the profile of the benefit cash flows, the funding level,
and the strength of the employer covenant;▪

the risks, rewards and suitability of a number of possible asset classes and investment strategies
and whether the return expected for taking any given investment risk is considered sufficient given
the risk being taken;▪

the need for appropriate diversification between different asset classes to ensure that both the
Scheme’s overall level of investment risk and the balance of individual asset risks are appropriate;and▪

the Trustees’ investment beliefs about how investment markets work, and which factors are most
likely to impact investment outcomes.

The Trustees’ key investment beliefs, which influenced the setting of the investment arrangements, areas follows:
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asset allocation is the primary driver of long-term returns;▪

risk-taking is necessary to achieve return, but not all risks are rewarded;▪

risks that are typically not rewarded should generally be avoided, hedged or diversified;▪

investment markets are not always efficient and there may be opportunities for good active
managers to add value;▪

investment managers who can consistently spot and profitably exploit market opportunities are
difficult to find and therefore passive management, where available, can be better value;▪

environmental, social and governance (ESG) factors, including but not limited to climate-related
factors, are likely to be one area of market inefficiency and so managers may be able to improverisk-adjusted returns by taking account of ESG factors;▪

long-term environmental, social and economic sustainability, including the implications of climatechange, is one factor that the Trustees should consider when making investment decisions; and▪

costs have a significant impact on long-term performance.

5.

Implementation of the investment arrangements

Before investing in any manner, the Trustees obtain and consider proper written advice from theirinvestment adviser on the question of whether the investment is satisfactory, having regard to the needfor suitable and appropriately diversified investments.
Details of the investment managers, their objectives, investment guidelines, and custody arrangements
are set out in the separate Investment Policy Implementation Document (“IPID”).
The Trustees have signed agreements with the investment managers and platform provider setting out
in detail the terms on which the portfolios are managed. The investment managers’ primary role is the
day-to-day investment management of the Scheme’s investments. The managers are authorised under
the Financial Services and Markets Act 2000 (as amended) to carry out such activities.
The Trustees and investment managers to whom discretion has been delegated exercise their powers
to giving effect to the principles in this Statement of Investment Principles, so far as is reasonably
practicable.
The Trustees have limited influence over managers’ investment practices because all the Scheme’s
assets are held in pooled funds, but it encourages their managers to improve their practices whereappropriate.
The Trustees’ view is that the fees paid to the investment managers, and the possibility of their mandate
being terminated, ensure they are incentivised to provide a high quality service that meets the statedobjectives, guidelines and restrictions of the fund. However, in practice managers cannot fully aligntheir strategy and decisions to the (potentially conflicting) policies of all their pooled fund investors in
relation to strategy, long-term performance of debt/equity issuers, engagement and portfolio turnover.
It is the Trustees’ responsibility to ensure that the managers’ investment approaches are consistent with
their policies before any new appointment, and to monitor and to consider terminating any existingarrangements that appear to be investing contrary to those policies. The Trustees expect investment
managers, where appropriate, to make decisions based on assessments of the longer term financial
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and non-financial performance of debt/equity issuers, and to engage with issuers to improve theirperformance. It assesses this when selecting and monitoring managers.
The Trustees evaluate investment manager performance by considering performance over both shorterand longer-term periods as available. Except in closed-ended funds where the duration of theinvestment is determined by the fund’s terms, the duration of a manager’s appointment will depend on
strategic considerations and the outlook for future performance. Generally, the Trustees would be
unlikely to terminate a mandate on short-term performance grounds alone.
The Trustees’ policy is to evaluate each of their investment managers by reference to the manager’s
individual performance as well the role it plays in helping the Scheme meet its overall long-term
objectives, taking account of risk, the need for diversification and liquidity. Each manager’s
remuneration, and the value for money it provides, is assessed in light of these considerations.
The Trustees recognise that portfolio turnover and associated transaction costs are a necessary part ofinvestment management and that the impact of portfolio turnover costs is reflected in performance
figures provided by the investment managers. The Trustees expect their investment consultant toincorporate portfolio turnover and resulting transaction costs as appropriate in their advice on the
Scheme’s investment mandates.
6.

Realisation of investments

The investment managers have discretion over the timing of realisation of investments of the Schemewithin the portfolios that they manage and in considerations relating to the liquidity of investments.
When appropriate, the Trustees, on the administrators’ recommendation, decide on the amount of cash
required for benefit payments and other outgoings and inform the investment managers of any liquidity
requirements.
7.

Financially material considerations and non-financial matters

The Trustees have considered how environmental, social and governance (“ESG”) and ethical factors
should be taken into account in the selection, retention and realisation of investments given the time
horizon of the Scheme and its members.
The Trustees expect their investment managers (where appropriate) to take account of financiallymaterial considerations (including climate change and other ESG considerations) when making
investment decisions. The Trustees seek to appoint managers that have appropriate skills andprocesses to do this, and may consider investing in funds (where appropriate) that demonstrate theincorporation of ESG factors, including climate-related factors, into the investment process. The
Trustees will, from time to time, review how their managers are taking account of these issues inpractice.
The Trustees have limited influence over managers’ investment practices where assets are held inpooled funds, but it encourages their managers to improve their practices where appropriate.
The Trustee has considered whether to take into account any non-financial matters (ie matters relating
to the ethical and other views of members and beneficiaries and the principal employer, rather thanconsiderations of financial risk and return) in the selection, retention and realisation of investments, andhas decided not to such matters into account.
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8.

Voting and engagement

The Trustees recognise their responsibilities as owners of capital, and believe that good stewardshippractices, including monitoring and engaging with investee companies, and exercising voting rights
attaching to investments, protect and enhance the long-term value of investments. The Trustees havedelegated to their investment managers the exercise of rights attaching to investments, including voting
rights, and engagement with issuers of debt and equity and other relevant persons about relevant
matters such as performance, strategy, risks and ESG considerations.
The Trustees do not monitor or engage directly with issuers or other holders of debt or equity. It
expects the investment managers to exercise ownership rights and undertake monitoring andengagement in line with the managers’ general policies on stewardship, as provided to the Trustees
from time to time, considering the long-term financial interests of the beneficiaries.
The Trustees monitor managers’ activities in relation to ESG factors, voting and engagement on aregular basis and discusses this subject with managers at regular Trustees’ meetings. The Trustees
seek to understand how the managers are implementing their stewardship policies in practice to confirm
that their stewardship is effective and aligned with the Trustees’ expectations.
The Trustees have selected Climate Change and Diversity, Equity and Inclusion as their key ESG
priorities to provide a focus for their monitoring of investment managers’ voting and engagement
activities. The Trustees review their ESG priorities regularly and updates them if appropriate. They
communicate these stewardship priorities to their managers and also confirm their more general
expectations in relation to ESG factors, voting and engagement.
If the Trustees’ monitoring identifies areas of concern, they will engage with the relevant manager toencourage improvements.
The Trustees seek to appoint managers that have strong stewardship policies and processes, reflecting
where relevant the recommendations of the UK Stewardship Code issued by the Financial Reporting
Council, and from time to time the Trustees review how these are implemented in practice.

Responsibilities, decision-making and fees
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Appendix 1

The Trustees have decided on the following division of responsibilities and decision-making for the
Scheme. This division is based upon the Trustees’ understanding of the various legal requirements
placed upon it, and their view that this division allows for efficient operation of the Scheme overall, withaccess to an appropriate level of expert advice and service. The Trustees’ investment powers are set
out within the Scheme’s governing documentation.
1.

Trustees

In broad terms, the Trustees are responsible in respect of investment matters for:▪

setting the investment strategy, in consultation with the employer and after receiving advice fromtheir advisers;▪

developing a mutual understanding of investment and risk issues with the employer;▪

reviewing the investment policy following the results of each valuation, and / or after any review ofinvestment strategy (eg any asset liability modelling exercise);▪

appointing, monitoring, reviewing and dismissing investment managers, custodians, investment
advisers, actuary and other advisers;▪

monitoring the exercise of the investment powers that they have delegated to the investment
managers and monitoring compliance with Section 36 of the Act;▪

formulating a policy in relation to financially material considerations, such as those relating to ESG
considerations (including but not limited to climate change);▪

setting a policy on the exercise of rights (including voting rights) and undertaking engagement
activities in respect of the investments;▪

communicating with members as appropriate on investment matters, such as the Trustees’
assessment of their effectiveness as a decision-making body, the policies regarding responsible
ownership and how such responsibilities have been discharged;▪

putting effective governance arrangements in place and documenting these arrangements in asuitable form, including setting the policy for rebalancing between asset classes;▪

reviewing the content of this SIP from time to time and modifying it if deemed appropriate; and▪

consulting with the employer when reviewing the SIP;

2.

Platform provider

The investment platform provider will be responsible for:▪

providing access to a range of funds managed by various investment managers; and▪

providing the Trustees with regular information concerning the management and performance of
the assets.

3.

Investment managers

In broad terms, the investment managers will be responsible for:▪

managing the portfolios of assets according to their stated objectives, and within the

Appendix 1 (cont)guidelines and restrictions set out in their respective investment manager agreements
and/or other relevant governing documentation;

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taking account of financially material considerations (including climate change and other ESG
considerations) as appropriate when managing the portfolios of assets;▪

exercising rights (including voting rights) attaching to investments and undertaking engagement
activities in respect of investments;▪

providing the Trustees with regular information concerning the management and performance of
their respective portfolios; and▪

having regard to the provisions of Section 36 of the Act insofar as it is necessary to do so.

4.

Investment adviser

In broad terms, the investment adviser will be responsible, in respect of investment matters, as
requested by the Trustees, for:▪

advising on how material changes within the Scheme’s benefits, membership, and funding
position may affect the manner in which the assets should be invested and the asset allocation
policy;▪

advising on the selection, and review, of the investment managers, incorporating their assessmentof the nature and effectiveness of the managers’ approaches to financially material considerations(including climate change and other ESG considerations); and▪

participating with the Trustees in reviews of this SIP;

5.

Fee structures

The Trustees recognise that the provision of investment management and advisory services to the
Scheme results in a range of charges to be met, directly or indirectly, by deduction from the Scheme’s
assets.
The Trustees have agreed Terms of Business with the Scheme’s investment advisers, under which
work undertaken is charged for by an agreed fixed fee or on a “time-cost” basis.
The investment managers and platform provider receive fees calculated by reference to the market
value of assets under management. The fee rates are believed to be consistent with the managers’
general terms for institutional clients and are considered by the Trustees to be reasonable whencompared with those of other similar providers.
The fee structure used in each case has been selected with regard to existing custom and practice, andthe Trustees’ view as to the most appropriate arrangements for the Scheme. However, the Trustees
will consider revising any given structure if and when it is considered appropriate to do so.
6.

Performance assessment

The Trustees are satisfied, taking into account the external expertise available, that there are sufficient
resources to support their investment responsibilities. The Trustees believe that it has sufficientexpertise and appropriate training to carry out their roles effectively.

It is the Trustees’ policy to assess the performance of the Scheme’s investments, investment

Appendix 1 (cont)providers and professional advisers from time to time. The Trustees will also carry out
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periodically an assessment of their own effectiveness as a decision-making body and will
decide how this may then be reported to members.
7.

Working with the Scheme’s employer

When reviewing matters regarding the Scheme’s investment arrangements, such as the SIP, theTrustees seek to give due consideration to the employer’s perspective. While the requirement to
consult does not mean that the Trustees need to reach agreement with the employer, the Trustees
believe that better outcomes will generally be achieved if the Trustees and employer work together
collaboratively.

Policy towards risk

Appendix 2

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1.

Risk appetite and risk capacity

Risk appetite is a measure of how much risk the Trustees are willing to bear within the Scheme in order
to meet its investment objectives. Taking more risk is expected to mean that those objectives can beachieved more quickly, but it also means that there is a greater likelihood that the objectives are
missed, in the absence of remedial action. Risk capacity is a measure of the extent to which theTrustees can tolerate deviation from its long-term objectives before attainment of those objectives isseriously impaired. The Trustees aims to strike the right balance between risk appetite and risk
capacity.
When assessing the risk appetite and risk capacity, the Trustees considered a range of qualitative andquantitative factors, including:▪

the strength of the employer’s covenant and how this may change in the near/medium future;▪

the agreed journey plan and employer contributions;▪

the Scheme’s funding target;▪

the Scheme’s liability profile, its interest rate and inflation sensitivities, and the extent to whichthese are hedged;▪

the Scheme’s cash flow and target return requirements; and▪

the level of expected return and expected level of risk (as measured by Value at Risk (“VaR”).

2.

Approach to managing and monitoring investment risks

The Trustees consider that there are a number of different types of investment risk that are important for
the Scheme. These include, but are not limited to:
2.1.

Risk of inadequate returns
A key objective of the Trustees is that, over the long-term, the Scheme should have adequate
assets to meet its liabilities as they fall due. The Trustees therefore invest the assets of the
Scheme to produce a sufficient long-term return in excess of the liabilities. There is also a riskthat the performance of the Scheme’s assets and liabilities diverges in certain financial andeconomic conditions in the short term. This risk has been taken into account in setting theinvestment strategy and is monitored by the Trustees on a regular basis.

2.2.

Risk from lack of diversification
This is the risk that failure of a particular investment, or the general poor performance of agiven investment type, could materially adversely affect the Scheme’s assets. The Trustees
believe that the Scheme’s assets are adequately diversified between different asset classes
and within each asset class. This was key consideration when determining the Scheme’s
investment arrangements.

2.3.

Investment manager risk

Appendix 2 (cont)This is the risk that an investment manager fails to meet its investment objectives. Prior to

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appointing an investment manager, the Trustees receive written advice from their advisers.
The Trustees monitor the investment managers on a regular basis.
2.4.

Liquidity/marketability riskThis is the risk that the Scheme is unable to realise assets to meet benefit cash flows as theyfall due. The Trustees are aware of the Scheme’s cash flow requirements and believes that
this risk is managed by maintaining an appropriate degree of liquidity across the Scheme’s
investments.

2.5.

Credit riskThis is the risk that one party to a financial instrument will cause a financial loss for the otherparty by failing to discharge an obligation. The Scheme is subject to credit risk because it
invests in bonds and property via pooled funds. The Trustees manage exposure to credit risk
by investing in pooled funds that have a diversified exposure to different credit issuers andcredit types.

2.6.

Currency risk
Whilst the majority of the currency exposure of the Scheme’s assets is to Sterling, the Scheme
is subject to currency risk because some of the Scheme’s investments are held in overseas
markets. The Trustees consider the overseas currency exposure in the context of the overall
investment strategy, and believes that the currency exposure that exists diversifies thestrategy and is appropriate.

2.7.

Interest rate and inflation risk
The Scheme’s assets are subject to interest rate and inflation risk because some of the
Scheme’s assets are held in bonds and swaps via pooled funds. However, the interest rateand inflation exposure of the Scheme’s assets hedges part of the corresponding risks
associated with the Scheme’s liabilities. The net effect will be to reduce the volatility of thefunding level, and so the Trustees believe that it is appropriate to have exposures to theserisks in this manner.

2.8.

Environmental, social and governance (ESG) risks
Environmental, social and corporate governance (ESG) factors are sources of risk to the
Scheme’s investments, some of which could be financially material, over both the short andlonger term. These potentially include risks relating to factors such as climate change,
unsustainable business practices, and unsound corporate governance. The Trustees seek toappoint investment managers who will manage these risks appropriately on their behalf andfrom time to time reviews how these risks are being managed in practice.

2.9.

Collateral adequacy risk
The Scheme is invested in leveraged Liability Driven Investment (“LDI”) arrangements toprovide protection (“hedging”) against adverse changes in interest rates and inflation
expectations. The LDI managers may from time to time call for additional cash to be paid tothe LDI funds in order to support a given level of leverage. Collateral adequacy risk is the risk

that the Trustees when requested to do so will not be able to post additional

Appendix 2 (cont)cash to the LDI funds within the required timeframe. A potential consequence of this risk isPage 11 of 11

that the Scheme’s interest rate and inflation hedging could be reduced and that the Scheme’sfunding level could suffer subsequently as a result. In order to manage this risk, the Trustees
ensure that the Scheme has a sufficient allocation to cash and other highly liquid assets which
can be readily realised, so that cash can be posted to the LDI managers at short notice.

2.10.

Other non-investment risks
The Trustees recognise that there are other, non-investment, risks faced by the Scheme, andtakes these into consideration as far as practical in setting the Scheme’s investment
arrangements.
Examples include:▪

longevity risk (the risk that members live, on average, longer than expected); and▪

sponsor covenant risk (the risk that, for whatever reason, the sponsoring employer isunable to support the Scheme as anticipated).

Together, the investment and non-investment risks give rise generally to funding risk. This is
the risk that the Scheme’s funding position falls below what is considered an appropriate level.
By understanding and considering the key risks that contribute to funding risk, the Trustees
believe that it has appropriately addressed and is positioned to manage this general risk.