Devon Pension Fund and Investments

Investment Update

Performance for the six months to 30 September 2018
(Financial Year to Date)


Fund Value

as at
30 Sept 2018


Fund Return

quarter to
30 Sept  2018


 Global Bonds218.4+1.2
Multi-Sector Credit222.5+0.3
 Cash (inc foreign currency)84.8+1.7
Passive Equities1,954.8+9.8
Active Global Equities463.3+7.8
Active Emerging Market Equities178.8-3.9
Diversified Growth Funds615.5+0.9
Private Debt43.9+7.5
Total Fund4,332.6+5.6

The Fund value as at 30th September 2018 stood at £4,332.6 million, an increase of £93m over the quarter, and around £246 million since 31st March 2018.

Key issues over the six months include:

  • The active global and emerging markets equities mandates have underperformed their benchmarks over the six months. This has been the major contributor to the below benchmark performance for the total Fund. The emerging markets underperformance was all during the first quarter, with improved performance ahead of benchmark over the quarter to September.
  • Global bonds produced a positive 1.2% return just below the benchmark, while the multi-sector credit has only delivered a 0.3% return, albeit above the reference benchmark.
  • The diversified growth funds (DGFs) have collectively performed below their cash plus benchmarks, while property also under-performed.
  • The private debt returns were boosted by income distributions from both funds, and by currency gains on the US investment.

Asset Allocation

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

Fixed Interest and Cash13.012.1
Alternatives /Other29.027.9
  • For 2018/19 the strategic asset allocation has been amended, such that the allocation to diversified growth funds is reduced to 13% and the strategic allocation to private debt is shown as 2%. This reflects the likely drawdown during 2018/19 of the private debt commitments previously agreed by the Committee to be funded from the diversified growth fund allocation.
  • All asset classes were within the 2.5% threshold from their target weight as at 30th September. The allocation to passive equities was 2.1% above the target weight, but no action is proposed to re-balance, particularly as equity markets have fallen during October.
  • A geographical analysis of the Fund’s equity allocation shows that the Fund has an over-exposure to the UK and a significant underexposure to North America compared to the world market. There is also a smaller underexposure to Japan, while the exposure to Europe is about right. There is also an overexposure to Emerging Markets.
  • The Committee have previously agreed that in principle, the Fund should look to reduce its overweight to UK equities by reallocating to overseas equities on a phased basis. A total of £186 million had been moved by the end of September 2018, comprising the minimum monthly sum agreed, plus additional amounts transferred when the agreed trigger points were hit. A further £40 million has been transferred since the end of September.
  • Given the progress made towards reducing the UK allocation, and with continued concerns that US equities are currently highly valued versus the rest of the world, mainly due to the tech stocks, it was agreed to slow down the transfer from the UK to Global equities over the next quarter, unless trigger points are hit. It was agreed to reduce the regular monthly amount to be transferred from £20 million to £10 million. Should the trigger points be hit whereby the UK market has significantly outperformed the Global Developed World market, then additional sums will be transferred as previously agreed by the Committee.