Fund values and investment return
| Sector | Fund value as at 30 September 2024 (£m) | Fund return YTD: 1 April to 30 September 2024 (%) | Fund return: three years to 30 September 2024 (annualised) (%) |
|---|---|---|---|
| Investment Grade Bonds | 445.7 | +2.8 | -1.9 |
| Multi-Asset Credit | 750.9 | +5.9 | +3.7 |
| Cash (including foreign currency) | 194.5 | +2.1 | +2.9 |
| Passive Equities | 1,571.7 | +5.8 | +9.3 |
| Global High Alpha Equities | 359.9 | +0.5 | +6.0 |
| Global Smaller Companies Equities | 312.2 | +1.6 | +0.1 |
| Emerging Market Equities | 304.7 | +8.4 | -1.1 |
| Sustainable Equities | 611.8 | -0.5 | +2.3 |
| Diversifying Returns Funds | 141.1 | +1.3 | +3.2 |
| UK Property | 430.8 | +1.8 | -0.3 |
| International Property | 86.1 | +2.4 | +3.0 |
| Infrastructure | 547.1 | +2.3 | +6.8 |
| Private Equity | 101.9 | +1.1 | +4.8 |
| Private Debt | 213.9 | +5.0 | +10.3 |
| Local Impact Portfolio | 66.5 | +4.0 | – |
| Total fund | 6,139.9 | +3.6 | +4.7 |
Key Points
- The Fund value as at 30 September 2024 stood at £6,139.9 million, an increase of £155 million over the last quarter, and £225 million over the financial year to date.
- Bond markets performed positively over the quarter as both the Federal Reserve (Fed) and Bank of England (BoE) followed the European Central Bank in making rate cuts. Both the Multi-Asset Credit and Sterling Corporate Bonds portfolio performed ahead of benchmark.
- The active equity portfolios had another mixed quarter. The Emerging Markets portfolio had another positive quarter and remains ahead of benchmark over the year to date. The Smaller Companies portfolio is also ahead of benchmark over the year to date. Stock selection was again the main driver of relative returns over the period and was particularly strong in the health care and information technology sectors. The Global High Alpha and Sustainable Equities portfolios were below benchmark due to their tilt towards growth and quality stocks during a period when value stocks outperformed growth stocks.
- The UK Property portfolio was positive, with the market showing some signs of moving back towards positive performance after a difficult couple of years. International Property benefitted from the currency hedging in place against an unhedged benchmark.
- The private market portfolios all showed positive performance, although performance relative to benchmark was mixed. Private markets valuations are generally a quarter in arrears, so performance is more reflective of market conditions over the first 6 months of the calendar year.
Overall Asset Allocation
The current asset allocation, compared to the 2024/25 target asset allocation, is shown in the table below:
| Asset | Target allocation (%) | Actual allocation (%) |
|---|---|---|
| Fixed interest and cash | 20.0 | 22.6 |
| Equities | 50.0 | 51.6 |
| Alternatives/Other | 30.0 | 25.8 |
Key points to note about Asset Allocation
- 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.
- The Equity allocation was reduced by £60 million during September, which has reduced the overweight against target.
- The main underweight allocation continues to be that to Alternatives/Other. The target weightings now reflect the agreed medium/long term targets and therefore the target for Diversifying Returns Funds is shown as zero. However, there is no quick fix to increasing the allocations to the private markets asset classes up to target as we are dependent on the funds concerned calling the significant commitments that have been made. Therefore, unless other options are considered the current allocation to Diversifying Returns Funds is likely to remain for some time.
- An additional £31.8 million was invested by Brunel between two UK property funds at the end of September, which has increased the UK Property allocation up to 7% of the Fund. The Property allocation remains underweight and Brunel are looking for further opportunities on the secondary market to bring the allocation up to the target.
- 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.
- The Local Impact Portfolio will also take some time to build up. Investments have now been made in 3 of the 5 funds agreed by the Committee. Formal commitments have been made to the other 2 funds (Octopus and Foresight), and we are awaiting the first capital calls.
- No action to rebalance is proposed.