Devon Pension Fund and Investments

Investment Update

Performance for the nine months to 31 December 2019
(Financial Year to Date)

 Sector

Fund Value

as at
30 June 2019

(£m)

Fund Return

quarter to
30 June 2019

(%)

 Global Bonds268.5+4.1
Multi-Sector Credit282.6+6.5
 Cash (inc foreign currency)46.4+1.0
Passive Equities1,892.9+10.7
Active Global Equities484.2+9.7
Active Emerging Market Equities224.9+7.4
Low Volatility Equities219.9+8.5
Diversified Growth Funds623.6+5.7
Property383.9+2.2
Infrastructure163.4+2.2
Private Debt103.1+4.9
Total Fund4,693.4+7.6

The Fund value as at 31st December 2019 stood at £4,693.4 million, an increase of £137 million over the quarter.

Key issues over the nine months of the year to date include:

  • Bond prices fell over the quarter, reducing the return on Global Bonds for the year to date to +4.1% (from +7.3% at the end of September), but remaining ahead of benchmark. Multisector credit had a better quarter and has delivered a return of +6.5% over the year to date, ahead of the reference benchmark.
  • As would be expected, passive equities performed in line with benchmark. The currency hedging strategy will have helped returns in a period when Sterling increased in value. As a result the Fund will have performed better than other funds with no currency hedging in place. 
  • Active global equities remain below benchmark, although the Specialist Funds had a better quarter. The main global equity mandate transitioned across to Brunel during the quarter. 
  • Low Volatility Equities had a poor quarter, leaving them below benchmark.  The diversified growth funds had a reasonable quarter and are ahead of their cash plus benchmarks. 
  • Two of the Fund’s infrastructure investments saw reductions in capital value over the quarter, reducing the return. Property has performed in line with the benchmark and private debt continues to deliver a consistent positive return.

Asset Allocation

The current asset allocation, compared to the 2018/19 target allocation, is shown in the table below:

Target
Allocation
(%)
Actual
Allocation
(%)
Fixed Interest and Cash13.012.7
 Equities58.060.1
Alternatives /Other29.027.2
 100.0100.0
  • As agreed by the Committee, an additional £40 million was allocated to Wellington’s multisector credit fund and £30 million to Lazard’s global bonds mandate during the quarter, funded by the deficit payment from Plymouth City Council. These investments have reduced the underweight position of the fixed interest allocations compared to the target weight. 
  • The allocation to equities was 2.1% above target at the quarter end. 
  • The main underweight area is the private markets allocations (property, infrastructure and private debt). New investment in private markets takes longer to achieve than in listed markets, requiring commitments to be made which will then be drawn down over time. The Fund currently has £175 million committed to Brunel’s Infrastructure portfolio, of which to date just under £20 million has been drawn. The Committee agreed further commitments at its last meeting that will be made in Brunel’s April commitment window. 
  • The property allocation is now showing a larger underweight. This is a result of cash previously being held by La Salle being returned to the Fund when Brunel took over management of the portfolio.