Issued: 23 November 2004
The Pensions Trust, a £2.3bn (€3.3bn) investment scheme for 4,150 UK charities, has recently overhauled its asset allocation strategy in favour of a "liability-driven" method of money management.
"At one time we were happy to use the one-size-fits-all approach" says chief executive Richard Stroud. "But when it became clear some funds were maturing faster than others, alongside our consultants Mercers we decided to set up different asset allocation groups."
Between July and September the fund moved from offering its charities an investment strategy benchmarked to the WM all funds peer group average, to a range of asset allocation strategies with differing equity/bond and property splits, from 75/25 to 30/70.
The Trust kept its existing fund managers despite the new investment set up, adding only ISIS, which is providing an ethical option for those charities with defined contribution schemes.
The charities' choices have led to just over 75% of the overall fund being invested in equities. The current property allocation is 4.8%, or about £90m. This is to be raised to £150m in the coming months.
"Property valuations are currently a little on the high side because so many pension funds want to get into the market, so we are waiting to invest further when the right opportunities come up," Mr Stroud says. "We are not interested in investing through unit trusts. With £150m to invest we can achieve sufficient diversification on our own. The Trouble with unit trusts is they invest in the secondary market and they are very difficult to get out of. I’m also convinced about the bid-offer spreads involved."
The Pensions Trust Asset Allocation
| Manager |
Mandate |
% of fund |
| Legal & General |
Passive equities & fixed income, exc. corporate bonds |
42.4 |
| Morley Fund Management |
Index-linked & global bonds |
13.4 |
| Barclays Global Investors |
Global equities |
13.0 |
| Capital International |
Global equities |
10.6 |
| Fidelity |
UK & European equities |
10.4 |
| CB Richard Ellis |
Direct property |
4.8 |
| Standard Life |
Corporate bonds |
3.6 |
| ISIS |
Ethical fund |
1.0 |
| Nothern Trust |
Remainder in cash |
~ |
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