Devon Pension Fund and Investments

Investment Update

Performance for the year to 31 March 2020


Fund Value

as at
31 March 2020


Fund Return

year to
31 March 2020


Global Bonds280.8+7.2
Multi-Sector Credit246.7-7.2
Cash (inc foreign currency)41.9+0.5
Passive Equities1,505.3-12.0
Active Global Equities385.3-12.2
Active Emerging Market Equities179.0-14.5
Low Volatility Equities186.4+8.1
Diversified Growth Funds526.1-10.9
Private Debt107.4+10.3
Total Fund4,011.1-8.0

During the quarter global markets were hit by the coronavirus Covid-19 pandemic, and as a result the value of the Fund declined significantly. The Fund value as at 31st March 2020 stood at £4,011.1 million, a decrease of £682 million over the quarter, and £291 million over the year. .

Key issues over the quarter and year include:

  • Global Bonds delivered a positive return over the quarter, as investors looked for safety as equity markets fell as a result of the pandemic. This took the return for the year to +7.2%. Multi-sector credit, by comparison, invests in the riskier end of the fixed interest market, and as a result saw a fall of 12.8% over the quarter, taking the annual return to -7.2%. However, performance was better than the reference benchmark, which fell by 9.7% over the year. 
  • As would be expected, passive equities performed in line with benchmark. However, the fall in the value of the pound over the quarter meant that the currency hedging strategy performed less well than a completely unhedged portfolio would have done. UK equities fell by more than global equities, with a return of -18.5% over the year. 
  • Active global equities were significantly below benchmark. The major reason for this was the performance of the Specialist Funds. Smaller companies were particularly hard hit by the pandemic which had a major impact on the portfolio.
  • Low Volatility Equities should do better in retaining value during market falls. However, performance has been below benchmark. 
  • The last quarter should have been an opportunity for the diversified growth funds to shine, as it would be expected that they would hold up better than equity markets. However, a preference for the riskier end of the fixed interest market, which also did badly, and low allocations to Government bonds, meant that they participated in most of the market falls, which was disappointing. 
  • The private markets investments’ valuations have held up better, but the impact of the pandemic on their performance is likely to be lagged, and will be reflected in the next quarter’s returns.

Asset Allocation

The current asset allocation, compared to the 2019/20 target allocation, is shown in the table below:

Fixed Interest and Cash13.014.2
Alternatives /Other29.029.6
  • The most significant impact of the pandemic was on equity markets, and as a result the allocation to equities was underweight at the quarter end. Following consultation with the Chair, advance deficit contributions received in April were used to invest an additional £15 million each in the underweight allocations to emerging markets and low volatility equities. 
  • Fixed interest was above the target allocation at the quarter end, with the global bonds allocation achieving a positive return over the quarter, as equities fell. The cash position shown includes the net impact of year end accruals in addition to the actual cash balances. 
  • The alternatives/other allocation is broadly in line with target, although the intention is to reduce the allocation to diversified growth funds significantly by investing in private markets. This will take some time to achieve. At the February Committee it was agreed to invest further in Property, but the current environment is not ideal for investing in property, with many funds ceasing to trade due to uncertainty over valuations. 
  • Following discussion between the County Treasurer, the Chairman and the Independent Investment Advisor no further action is proposed to rebalance allocations.