Performance for the quarter and three years to 30 June 2020
|Sector||Fund value as at 30 June 2020 (£m)||Fund return: quarter to 30 June 2020 (%)||Fund return: three years to 30 June 2020 (annualised) (%)|
|Cash (including foreign currency)||43.8||-0.8||+1.1|
|Active global equities||468.2||+21.1||+5.1|
|Active emerging market equities||229.0||+18.7||+1.3|
|Low volatility equities||224.2||+11.9||–|
|Diversified growth funds||559.2||+10.0||+0.4|
During the quarter, markets recovered to a large extent from the losses of the previous quarter, and as a result the Fund value as at 30 June 2020 stood at £4,508.5 million, an increase of just under £500 million over the quarter.
Key issues over the quarter include:
- All asset classes delivered a positive return over the quarter, with the exception of property and private debt. In both cases, the negative return will be as a result of the lagged impact of the pandemic on valuations. Property is likely to see further reductions in capital value, while private debt is more likely to revert to positive returns if defaults can be avoided.
- The allocations to global bonds and multi-sector credit were ahead of their benchmarks, both for the quarter and for the three year period to 30 June 2020.
- Within the equity allocations, active global equities performed above benchmark, largely due to the Brunel Global High Alpha portfolio, while the specialist equity funds were below benchmark. The low volatility equities portfolio performed well below the benchmark. This is to be expected in a rising market, the disappointing aspect is that it also performed below benchmark when markets fell in the previous quarter.
- The diversified growth funds recovered with a +10% return over the quarter, but this did not make up for the previous quarter’s poor performance. Over the 6 months the combined return is -7.4%, which then feeds into the poor three year performance returns.
The current asset allocation, compared to the 2020/21 target allocation, is shown in the table below:
|Target allocation (%)||Target allocation (%)|
|Fixed interest and cash||13.0||13.8|
- The fixed interest and equity allocations were both slightly above target at the quarter end. Within equities, an additional allocation of 2% to low volatility had yet to be made, to be funded from passive equities. The launch of Brunel’s Sustainable Equities and Global Small Cap portfolios is due during September/October, and allocations will be made to both of these, as previously agreed.
- The allocation to alternatives, including private markets and diversified growth funds, is under-weight. Significant commitments have been made to infrastructure, private debt and private equity via Brunel, totalling £650 million of which to date only around £40 million has been invested. This will largely be funded from the allocation to diversified growth funds, but this will only happen slowly as commitments are drawn down by Brunel.
- The Investment and Pension Fund Committee resolved at their meeting on 18 September that £90 million be transferred from passive equities to low volatility equities in order to bring the allocation to low volatility equities up to the 7% target for 2020/21 set out in the Investment Strategy Statement.