PPF Broadens Its Investment Horizons

(November 28, 2012) — The £12 billion ($19.2 billion) Pension Protection Fund has expanded its spectrum of permitted asset classes.

Its annually updated Statement of Investment Principles now reveals that the fund will recognize farmland and timberland as separate asset classes, appointing seven fund managers last week dedicated to those sectors.

“Investing in farm and timberland will complement our existing alternative investment portfolio, allow us to diversify our investments more widely and make our portfolio more resilient,” PPF’s Executive Director for Financial Risk Martin Clarke, said. “But we do need to be aware that there are some risks in these asset classes, for instance land price risk. Therefore, our approach will be to invest conservatively – which is consistent with our overall low-risk strategy.”

The fund has a strategic allocation to cash and bonds of 70% with a tolerance range of 65% to 80%. It targets a long-term investment return of 1.8% a year over liabilities.

The compete list of assets the PPF is allowed to invest in:

1) Cash and Bonds:

-Cash (including currencies)

-UK Gilts (fixed and inflation linked)

-Sterling denominated interest rate and inflation swaps

-Sterling bond repurchase agreements

-Sovereign bonds

-Other bonds of at least investment grade credit quality

-Emerging market debt

2) Public Equities

– Equities listed on recognized stock markets

3) Alternative Assets

-Property

-Private Equity

-Sub-investment grade debt

-Infrastructure

-Farmland

-Timberland

-Funds aiming to achieve an absolute return

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