Office of the County Treasurer - Mary Davis
Rebalancing of the Pension Fund’s Asset Allocation.
Decision taken to reduce the allocation to passive equities by £50 million, and to increase the allocation to Diversified Growth Funds by £40 million and to cash by £10 million.
In accordance with the Fund’s rebalancing policy, agreed by the Investment and Pension Fund Committee in June 2013, if an asset class is more than 2.5% above or below the target allocation, this should “prompt a decision by officers, in discussion with the Fund’s adviser, as to whether any action is required” to rebalance the fund back to its target allocations.
At the end of October the allocation to equities was 3.8% above target. It was concluded that now would be a good point at which to take some profit from the increase in equity values, and redeem £50m. It was also concluded that the best option for reinvestment would be to allocate £40 million to diversified growth funds, the current allocation to that asset class being 1% below target, and to retain £10 million as cash.
The option to do nothing was considered, but a policy of prudent rebalancing has been shown to be beneficial in the medium term. A reallocation to global bonds was also considered, as the allocation to that asset class is also below target, but it was considered that low current yields on fixed interest made them a less attractive asset class for additional investment.
No conflicts of interest in relation to this contract
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