BBC's DB scheme to increase alternatives
UK - Trustees of the £8.1bn (€10.2bn) BBC Pension Scheme have revealed they are looking at increasing commitments to alternative assets, following new allocations into debt, currency and private equity funds in 2007.
Figures from the pension fund's annual report for 2008 showed the value of scheme assets fell 0.9% over the year to 31 March 2008 from £8.2bn to £8.1bn, as the current investment strategy of being overweight in global equities was impacted by the sub-prime crisis.
The BBC pension scheme revealed an asset liability modelling (ALM) review undertaken in 2007 to examine whether the "efficiency of the investment strategy could be improved", concluded the current strategic asset allocation of 25% UK equities, 25% overseas equities, 30% bonds, 10% property and 10% alternative assets "should remain unchanged".
However the report noted at 31 March 2008 the scheme was 22% invested in UK equities, 35% in overseas equities and 21% bonds, In addition the scheme was slightly overweight in property at 13%, while 6% was allocated to alternative assets and 3% to cash.
The trustees highlighted in their investment report while overweighting of equities and underweighting of bonds had been "an extremely successful strategy over the last few years", it had performed "less well" in the year to 31 March 2008 as the credit crunch frightened investors leading to a fall in equities and rise in government bond prices.
As a result, the trustees report revealed although the short-term investment outlook is uncertain, the scheme expects to make "further new commitments in the alternative assets areas funded out of equities".
In addition, it confirmed as markets return to more "normal" levels over the medium term the fund expects to "make further moves out of equities into lower risk, lower return bonds" to rebalance its strategic position.
Despite the recent market volatility the pension fund, which has over 58,000 members and a surplus of £275m at 1 April 2007, said its existing nine equity and four bond managers have remained unchanged over the past year.
However, the scheme made some small changes to its property portfolio, with the two UK property managers given authority to invest up to 20% of their portfolios in pooled vehicles in continental Europe, with an additional £50m allocated for specific investment in this area.
The pension fund also appointed Warburg Pincus to manage a private equity mandate valued at £16.5m the end of March, while £14m has been invested in a mezzanine debt fund managed by Goldman Sachs & Co, and an additional £60m was placed in an active currency overlay programme run by Alliance Bernstein, resulting in the BBC scheme now investing in 11 alternative asset funds.
Figures showed over the year to 31 March 2008 the scheme achieved a negative return of -0.6% - 1.2% below the strategic benchmark although the report attributed this to a 0.7% reduction in performance because of "tactical positions" taken by the investment committee while the remaining 0.5% resulted from manager underperformance.
That said, over a five-year period the report claimed the scheme produced an annualize performance of 13% compared with the annual strategic benchmark of 12.2%.
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