Fund values and investment return
as at 31 December 2023
1 April to
31 December 2023 (%)
three years to
31 December 2023 (annualised) (%)
|Investment Grade Bonds
|Cash (including foreign currency)
|Global High Alpha Equities
|Global Smaller Companies Equities
|Emerging Market Equities
|Diversifying Returns Funds
|Local Impact Portfolio
Overall Asset Allocation
The current asset allocation, compared to the 2023/24 target asset allocation, is shown in the table below:
|Target allocation (%)
|Actual allocation (%)
|Fixed interest and cash
Key points to note about Asset Allocation
- The Fund value as at 31 December 2023 stood at £5,638.1 million, an increase of £275 million over the last quarter, and around £325 million over the financial year to date.
- Sterling Corporate Bonds and Multi-Asset Credit are both above the target weighting. While there is still significant uncertainty around the global economy, the expectation is that interest rates in the US and the UK will begin to come down in the latter half of 2024. In those circumstances, it is proposed to retain the small overweight position for the time being.
- The passive allocation has now been consolidated into the Global Paris Aligned Benchmark passive fund. As part of the consolidation, £50 million was withdrawn to rebalance the allocation back towards target. However, the strong equity performance during November and December has means that the weighting remains above the target level.
- The underweight allocation continues to be that to Alternatives/Other. The Property allocation in particular has struggled over the last year, and now stands at 1.8% 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.
- As at 30th September, the Fund retained an overweight to the UK via the investment in the UK Climate Transition Benchmark (CTB) Tracker Fund. The decision to consolidate the Fund’s passive equity allocation, including the UK CTB Funds, into the global developed Paris aligned benchmark fund was implemented in late October/early November. Therefore, the UK allocation will more closely align to its weighting in the FTSE All World and other global indices at the end of the current quarter (to 31 December).
- 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.
- Over the quarter, the first investment was made from the Local Impact Portfolio. However, the £17 million investment in the Quinbrook Renewables Impact Fund was from the commitment to the core fund, while the local Devon opportunities are still to be accessed.
- Following the passive consolidation and the rebalancing agreed at the last meeting of the Committee, it is not proposed to undertake any further rebalancing at this time.
Key points to note about Investment Performance
- 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.
- Over the quarter, the Sustainable Equities and Emerging Markets portfolios performed above benchmark, but all the active equity portfolios have underperformed against benchmark over both the current financial year to date and over the three year period. Over the medium term, underweights on the big seven tech stocks and on the energy sector have detracted from performance across the equity portfolios. The last quarter performance has been more impacted by individual stock selection, rather than macro factors.
- Infrastructure was the other significant area of relative underperformance over the quarter. 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. This has impacted on valuations to some extent, while the use of an inflation plus benchmark for Infrastructure has contributed to the underperformance given the continuing high level of inflation.
- Both UK and International Property have seen negative returns over the year to date during a period where property markets in general have fallen. But both are ahead of their respective benchmarks over both the financial year to date and the three year period.