Investment Structure
The Scheme’s current investment objectives are to achieve investment returns that, together with the contributions paid by the Company and by members in the future, ensures the assets of the Scheme are sufficient to meet the benefits due to each member as they fall due over time.
Statement of Investment Principles
The Scheme’s strategy and objectives, together with full details of the investment process are set out in the Statement of Investment Principles. This document is updated regularly and the latest version was agreed in December 2009. A copy is available to members from Invensys Pensions.
Investment strategy
The current investment policy is to achieve Gilts 15-year index + 1.00% p.a. as set out in the Scheme’s Statement of Investment Principles. This is in line with the funding plan agreed between the Company and the Trustee at the 2008 triennial valuation.
As a result, the Scheme is currently invested in:
- Liability Matching Fund (LMF) (44% of the assets) composed exclusively of UK government bonds, Network Rail bonds, cash and cash equivalent instruments and interest rate and inflation swap overlays worth approximately 60% of the assets (£2,300m). The LMF is managed by BlackRock.
- Active Bond Fund (ABF) (32% of the assets) composed of corporate bonds. The ABF is managed by AXA, M&G and GLG.
- Higher Performance Fund (HPF) (24% of total assets) comprised of a Fund of Hedge Funds and a Fixed Income Global Alpha Fund (BlackRock), a Dynamic Asset Allocation mandate (BNPParibas Investment Partners), 3 Broad Bond portfolios (Alliance Bernstein, Pioneer, Stone Harbor), a listed equity portfolio (Invesco).
The Trustee has diversified over the past years its investments in higher return assets, which until 2006 were mainly composed of equities. Since then, it has divested away from equities and into higher returning assets of different types; this diversification allows the Scheme to reduce the risks related to these types of assets. These are now invested in five different classes: i) broad bonds, ii) dynamic asset allocation, iii) a fund of hedge funds, iv) a fixed income hedge fund, as well as vi) equities. These are managed by eight investment managers, who are targeted against an absolute return above cash.
During the year, in addition to the split of the Matching Fund into the LMF and ABF, the following changes to the investment strategy have taken place:
- The fixed income hedge fund managed by BlackRock (FIGA) has been transferred out of the Matching Fund and into the HPF.
- The bond portfolio part of the equity derivatives overlay strategy, managed by GLG, is now part of the ABF.
- An additional investment of £150m was made into the Dynamic Asset Allocation portfolio managed by BNPParibas. The investment was made possible thanks to excess cash in the LMF.
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