Fund values and investment return
| Sector | Fund value as at 31 March 2024 (£m) |
Fund return: 1 April to 31 March 2024 (%) |
Fund return: three years to 31 March 2024 (annualised) (%) |
|---|---|---|---|
| Investment Grade Bonds | 432.4 | +8.8 | -2.6 |
| Multi-Asset Credit | 709.2 | +11.8 | +2.6 |
| Cash (including foreign currency) | 140.8 | +5.8 | +2.5 |
| Passive Equities | 1,591.4 | +21.1 | +10.1 |
| Global High Alpha Equities | 358.0 | +20.5 | +9.6 |
| Global Smaller Companies Equities | 308.4 | +9.8 | +2.9 |
| Emerging Market Equities | 281.0 | +3.9 | -4.4 |
| Sustainable Equities | 615.1 | +13.2 | +6.5 |
| Diversifying Returns Funds | 139.3 | +10.8 | +4.9 |
| UK Property | 366.0 | -0.1 | +1.5 |
| International Property | 92.9 | -7.9 | +3.2 |
| Infrastructure | 535.6 | +0.2 | +6.1 |
| Private Equity | 82.8 | +0.3 | – |
| Private Debt | 198.8 | +11.4 | +10.9 |
| Local Impact Portfolio | 62.5 | +1.9 | – |
| Total fund | 5,914.2 | +11.3 | +5.7 |
Key Points
- The Fund value as at 31 March 2024 stood at £5,914.2 million, an increase of £276 million over the last quarter, and just over £600 million over the financial year.
- The Sterling Corporate Bonds and Multi-Asset Credit portfolios have both delivered a positive return ahead of benchmark over the year to date, having previously struggled during the period of rapid increases in interest rates.
- The active equity portfolios had a mixed quarter, with Global Smaller Companies ahead of benchmark, Global High Alpha and Sustainable Equities more or less in line with the benchmark, and Emerging Markets below benchmark. Over the year, all the active equity portfolios have underperformed against benchmark. In the case of Global High Alpha and Sustainable Equities this has largely been due to underweights on the big seven tech stocks (Microsoft, Apple, Alphabet, Amazon, Meta, Tesla and Nvidia) and the energy sector.
- Infrastructure has been the other significant area of relative underperformance over the year. Rising interest rates have impacted on both Infrastructure and Private Equity, as they have fed through to an increase in the cost of capital, most obviously in debt funding costs. In particular, three of the longstanding investments made over 10 years ago suffered double digit negative returns over the year, which offset the better performance across the rest of the allocation. The under-performance was more notable given the benchmark targets a return 4% above inflation, and inflation has been at relatively high levels.
- UK Property had a small positive return over the quarter, but remained marginally negative for the year. International Property has seen negative returns over both the last quarter and the year. The last two years have seen falls in the capital value of both UK and global property and the returns experienced by our portfolio have reflected that to some degree; the UK Property portfolio is still ahead of the benchmark over one and three years.
Overall Asset Allocation
The current asset allocation, compared to the 2023/24 target asset allocation, is shown in the table below:
| Header label | Target allocation (%) | Actual allocation (%) |
|---|---|---|
| Fixed interest and cash | 20.0 | 21.4 |
| Equities | 50.0 | 53.5 |
| Alternatives/Other | 30.0 | 25.1 |
Key points to note about Asset Allocation
- The Sterling Corporate Bonds and Multi-Asset Credit are both reasonably close to the target asset allocation. As agreed by the Committee in June 2023, the level of cash being held is currently above the 1% target.
- After a second consecutive good quarter for Equity returns, the Equity allocation was 3.5% above target, with the biggest overweight being the Passive allocation.
- The main underweight allocation continues to be that to Alternatives/Other. The Property allocation in particular has struggled over the last two years, and now stands at 2.2% below target (UK and International combined). Brunel have made commitments to a couple of property funds as part of bringing our portfolio in line with their model portfolio.
- Significant commitments have been made to bring private debt and private equity up to the target level, but these will still take some time to be fully drawn.
- In recognition of the overweight to Equities, £50 million has subsequently been redeemed from the Global Paris Aligned Passive Equity allocation. This will have been received as cash in early June, and will be retained as cash pending private market calls.