The East Riding of Yorkshire County Council Pension Fund, which has assets of £4.2 billion ($5.3 billion; €4.9 billion), is planning on upping its allocation to alternative investments, according to the agenda for its most recent committee meeting.
The fund’s strategic allocation to alternatives in 2016 was aimed at being 14 percent of its assets under management. The agenda notes the pension fund exceeded the upper limit of this targeted allocation due to new investments, capital appreciation and currency movements.
The pension fund’s documents also note a revised allocation to alternatives of 26 percent of the portfolio. This will be alongside an allocation of 55 percent to equities and 19 percent to bonds and cash.
Within the 26 percent strategic asset allocation to alternatives, the pension fund has a 6 percent allocation to private equity and an 11 percent allocation to real estate. It works on the assumption that private equity will generate the highest returns of all its asset classes – at 8.4 percent per year – but with the highest volatility.
In 2016 the committed to funds managed by August Equity and Panoramic Growth Equity.
The pension fund’s committee is also suggesting replacing its allocations to global high-yield debt and emerging market debt with an allocation to a multi-asset credit strategy. The strategy would include allocations to some forms of private debt including corporate mezzanine debt, direct lending, senior-secured loans and asset-backed securities, the pension fund’s documents note.
The pension fund currently has a strategic allocation of 2.5 percent to both global high-yield and emerging-market debt. The fund also has an allocation representing about 1.5 percent of its portfolio to, “a number of alternative credit investments including asset-backed debt and corporate mezzanine debt.”
An official from the pension fund’s committee did not return calls seeking additional comment by time of publication.
Toby Mitchenall contributed to this report.