The Railways Pension Scheme (RPS) increased its exposure to growth assets significantly in 2013 and looked to take advantage of rallying equity and economic markets, according to its annual report.

The fund, a multi-employer defined benefit (DB) scheme for the British rail industry, continued to benefit from global equities while reducing its liability-driven investment (LDI) portfolio.

After reaching a total of £18bn (€23bn) at the end of 2013, an increase of 6.8%, it now allocates less than 1% to LDI strategies and only 12.5% to its defensive and bond strategies.

Over 2013, the fund reduced its LDI exposure by 54%.

The fund is also examining its investment beliefs and reviewing the use of pooled funds, which it uses for all asset classes.

Derek Scott, chairman of the scheme, said the board was engaging with the pensions committee, employers and stakeholders before proposing a new investment and pooled fund strategy, after also reviewing investment beliefs.

RPS made significant shifts in diversification as it reduced its global equities portfolio by 65%, moving the majority of the assets into its mixed-asset growth portfolio.

The growth portfolio pooled fund changes allocations depending on the scheme’s risk budget, allocating to equities, corporate bonds, property, commodities, hedge funds and reinsurance.

It returned 8.6%, accounting for 61% of total assets, much of which was down to the performance of global equities.

Its standalone global equities portfolio, made up of active and passive mandates, returned 23% over the year and now accounts for £1.2bn, or 6.7%, of the fund.

This was despite the £1.5bn redemption of assets moving to the lower-returning growth portfolio.

Its £1.9bn private equity holdings returned 11.4%, which the fund said was less than the benchmark.

“There is often a significant time lag for revised information on underlying investments to flow through to valuation,” RPS said.

“Therefore, due to this lag, the return for 2013 has not fully captured the rally in equity markets.”

The fund also made positive returns in infrastructure and held £876m in assets at the end of 2013, after returns of 21.3%.

Property returned 11.5%.

However, the fund’s defensive pool of assets, which it set up in 2012 to “facilitate risk reduction”, lost 1.1% after investing in sovereign and corporate bonds, both which suffered drops in value.

Scott said the investment returns were “reasonably strong”, with the growth fund boosted by double-digit equity returns.

He also pointed out that the growth fund – which underperformed benchmark – was not designed to match the performance of equities but to “balance the risks and volatile returns”.