Welcome to the October edition of our Investment Update, an opportunity to share our latest performance figures and investment news. You will see from the commentary that the investment strategy has continued to deliver strong returns. In order to manage volatility and cognisant of current equity market valuations, TPT’s investment strategy for the growth portfolio is to continue diversifying the portfolio away from equities by sourcing suitable alternative investments.
During the last quarter, we have been focused on finding opportunities to increase our exposure to infrastructure, an asset class with which we are already familiar, as well as looking at new strategies to deliver stable low volatility returns. We have recently completed due diligence on two investment managers running infrastructure strategies. We think these will be complimentary to the existing infrastructure portfolio and will also fit well with the priorities highlighted in TPT's Climate Change Report
In the coming months, we will turn our focus to due diligence on new strategies (regulatory capital and alternative risk premia). We are pleased with these strategies as they provide further diversification of returns that have low correlation with equities. We will be providing employers with further information on the appointment of new investment managers in due course.
There have also been some other important changes to note during the last quarter. I am pleased to announce that the investment team has been expanding and we have recruited two new individuals to the team, an intern and an analyst. We are now eleven people strong and to accommodate the bigger team, we have moved to new offices - still located in central London, with the advantage of being close to the investment managers we use to help implement our investment strategy.
We have also recently completed a review of our investment consultants. After having a relationship with Mercer for many years, the Investment Committee were impressed with the services presented by Redington during a series of in-depth interviews and we are pleased to announce that Redington will now act as TPT’s primary investment consultant.
We believe these changes will help us to deliver a high quality investment service for all of our schemes and underlying members.
I hope you enjoy this edition of Investment Update and if you have any thoughts on what you’d like to see in future edition, then please get in touch.
CIO, TPT Retirement Solutions
Consultation under the Pensions Act: Statement of Investment Principles (SIP)
Under the Pensions Act 1995 the Trustee of TPT is required to have a written SIP. The SIP governs investment decisions for TPT, and is required to be amended before any significant changes to the investment arrangements of TPT are implemented.
The Trustee has a statutory duty to consult all participating scheme employers before any material amendment is made to the SIP. We are seeking consultation with Employers as a considerable period has elapsed since the previous consultation. Please note the changes below are consistent with the evolution of best practice and do not necessarily represent material changes.
This email explains the proposed changes to the SIP.
• Section 4 notes that the main decision for Defined Benefit schemes is the mix between Liability Focused and Growth assets and provides more detail on how the latter are managed.
• Section 5 details the funds available for Defined Contribution assets, including ‘target date’, ‘ethical’ and ‘self-select’ funds, and section 7.2 specifies the Trustee’s relationship with their provider.
• Section 7.3 lists the main risks faced by the Trustee in managing the investments and how they are mitigated.
• Section 8 updates the Trustee’s responsible investment, climate change and voting and engagement policies.
How our defined benefit assets performed
Overall, TPT achieved strong asset returns over both a one year and five year period. As outlined in the market outlook section, the key contribution for growth assets has largely been driven by equities, but we are also pleased with the overall performance of many of our alternative growth assets classes.
In the last year, liability values have risen by 5.5% as gilt yields remain low. Our Liability Focussed Assets are designed to track liability values (and, therefore, limit funding level volatility) and these have kept pace, returning 7.0% over one year, thereby helping to mitigate the impact of these rising liabilities on scheme funding levels.
How our defined contribution assets performed
The table below shows the performance of a selected range of Target Date Funds.