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Investment Review

Investment Review. Alex Gracian Chief Investment Officer. What has the Fund returned. To the end of September 2013? The LPFA Fund: £4.714 bn on Sept 30th 2013. Return Quarter 0.92% YTD 8.74% 1yr 11.39% 3yr 7.7%. Financial Markets. Memorable events Abenomics

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Investment Review

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  1. Investment Review Alex Gracian Chief Investment Officer

  2. What has the Fund returned To the end of September 2013? • The LPFA Fund: £4.714 bn on Sept 30th 2013. Return • Quarter 0.92% • YTD 8.74% • 1yr 11.39% • 3yr 7.7%

  3. Financial Markets Memorable events Abenomics Bernanke’s summer tapering event that never was – market over reacted Carney’s interest rate guidance – too many getting out of jail cards Recent rapid growth predicted for the UK – from a lingering patient to rapid recovery Positive growth rate in Spain – all be it small but is a glimmer of hope

  4. LPFA Portfolio Performance 60/40 Portfolio – A hypothetical portfolio comprised of 60% International Equities and 40% UK Government bond rebalanced quarterly. NB: Unaudited returns – For illustrative purposes only

  5. Asset Class Returns Major Equity Market Returns UK Government Bonds Source: Bloomberg – Net Total Returns in GBP

  6. The Fund Asset Allocation Distribution at 30th September 2013:

  7. What are we doing? • Bearing in mind the big economic picture • Do what we do best – manage the assets intelligently and for the long term • Invest innovatively e.g. synthesising equities • Build up the quantitative ability to analyse risks and look for investment opportunities • Build up asset liability modelling capability to better manage assets & liabilities • Build up an illiquid portfolio to harvest the illiquidity premium • Build up the team skills to bring more work in house to save on fees

  8. What have we done so far this year? • Completed the asset review and agreed on an overarching asset allocation framework • Building the investment team to enhance investment returns • Backfilling the asset allocation details • Made some new illiquid asset investments e.g. Bridges • Refining our process in finding good liquid investment managers/opportunities • Enhancing our capability to closely monitor liabilities in house

  9. Conclusion • We are in it all together and for the long term • We set ourselves target to achieve an expected real return of 3.5% to 4% to close the funding gap – a tall order but not impossible to achieve!

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