UK - The £10.5bn (€11.65bn) Shell UK Contributory Pension Fund (SCPF) is moving more towards passive management and has placed a cap on active equities, following the completion of an asset liability review.

Details of the strategy changes were revealed to employed members of the SCPF and employed members of the Shell Overseas Contributory Pension Fund (SOCPF) who have with SCPF in January via a webcast, but are now publicly available on the Shell UK website.

According to information provided through the webcast, Shell has introduced a 5% allocation to hedge funds and reduced its equity holding from 50% to 45% of assets.

More importantly, the fund has moved more of its equity and bond investments from active to passive management, and a maximum 40% limit has been placed on active equity management.

Trustees acknowledged there was likely to be less upside return in the future as a result, but also less downside.

Similarly, the fund has increased its inflation protection on bonds, and will begin to invest up to 5% of its assets in hedge funds, as executives believe "hedge funds - with careful selection - can be a less volatile alternative to equities and also provide an element of diversification".

The fund's asset allocation is now set as 45% equities, including 5% private equity, 40% fixed income, 10% real estate and 5% in hedge funds.

The Investment Committee said its main focus this year will be finalise implementation of the new investment strategy, and monitor its activity over time to see whether it matches the aim of rebuilding the fund's surplus.

The UK pension fund announced in October it was expanding its range of alternatives, and said it would alter labeling to give private equity and property their own asset classes. (See earlier IPE story: Shell UK pension to expand alternatives)

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