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London Borough of Bromley Pension Fund

London Borough of Bromley Pension Fund. Investment strategy review. Marcus Whitehead FIA, Partner 9 February 2012. Investment strategy review process. Outside scope of review: Manager/fund selection Implementation considerations. Current Fund position. Asset allocation. Liability profile.

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London Borough of Bromley Pension Fund

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  1. London Borough of Bromley Pension Fund Investment strategy review Marcus Whitehead FIA, Partner 9 February 2012

  2. Investment strategy review process • Outside scope of review: • Manager/fund selection • Implementation considerations

  3. Current Fund position Asset allocation Liability profile growth assets protection assets Source: Asset information as at 30.09.2011. Valuations sourced from Baillie Gifford and Fidelity. Liability cashflows provided by Barnett Waddingham Public Sector Consulting Team as at 31 March 2010.

  4. Fund objectives • To ensure that sufficient resources are available to meet all liabilities as they fall due. • To achieve this with as stable as possible employer contributions at the minimum level agreed by the Actuary. • To maximise the returns from investments within reasonable risk parameters. Source: Funding Strategy Statement Long-term net investor

  5. Growth/protection split • Actuary’s investment assumptions • Are these returns achievable? • 80%:20% growth:protection allocation remains appropriate…. • …. but consider the separation into explicit growth and protection mandates Source: Elroy Dimson, Paul Marsh and Mike Staunton, Credit Suisse Global Investment Returns Sourcebook 2011

  6. Design of overall mandate structure A look at the building blocks

  7. Importance of the governance budget Governance budget Complexity

  8. Governance budget in operation

  9. Cash • Gold • Commodities Asset classes • Government bonds • Corporate bonds • High yield • Emerging market debt • ABS/MBS Asset classes • UK shares • Overseas shares • Emerging market shares • Property • Private equity • Infrastructure Other • Hedge funds • Derivatives

  10. Growth strategy choosing return-seeking assets

  11. Possible growth portfolio strategies

  12. Traditional investing vs DGF investing

  13. DGF: Risk vs return Source: Barnett Waddingham

  14. DGF: Bull market Source: Barnett Waddingham

  15. Protectionstrategy matching the fund’s liabilities

  16. Protection portfolio recommendations • Fund liabilities are entirely inflation-linked……. • ……..but the Fund’s bond assets are entirely fixed interest.

  17. Investment strategy proposals

  18. Proposed mandate allocation

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