Investment Report

  • Christine Johnson

  • Trustee & Chair of the Investment Strategy Group

Investment objective:

The investment objective of the Trust is to invest the funds received from plan sales to maximise the likelihood that the Trust’s assets will be sufficient to meet the anticipated invoice costs of all outstanding and matured plans.

In pursuit of this objective, the Trustees keep under constant review both the estimated real value in today’s terms of the Trust’s assets, including the forecast returns from those assets, and the estimated value of all future anticipated payments on maturing plans.

Investment strategy:

Based on the advice of the Investment Strategy Group, the Board has put in place a diversified asset allocation which comprises mandates with eight investment managers to take advantage of investment and expertise in different areas. Our current target is to hold up to 50% of assets in index-linked gilts, with the remaining percentage divided between global equities, diversified growth funds, commercial property, infrastructure assets, corporate debt and cash.

The allocation by asset class at 31 March 2021 is shown in the chart below.

Investment update:

In response to the temporary increased cashflow demands over the year due to the impact of the COVID-19 pandemic, the Trust switched from income reinvestment to distribution where possible. In the year to 31 March 2021 the invested assets distributed about £12.4m which was supplemented by a total disinvestment of £20.0m from LGIM’s index-linked government bond holding (£10m disinvested in both June and July 2020) to meet net cash outflows.

Investment managers:

Representatives from each of the eight managers of the underlying funds, including the senior personnel directly responsible for managing the mandate, are invited on a rolling basis to attend meetings with the Investment Strategy Group. This helps both to monitor performance and to understand how each investment manager is discharging its responsibilities.

The allocation by investment manager at 31 March 2021 is shown in the chart below.

Investment performance:

The performance of the investment managers is measured against specific benchmarks and monitored by our investment advisers and by the Investment Strategy Group. Each month our investment advisers provide the Investment Strategy Group with a statement of the overall performance of the investment portfolio and of the individual underlying managers. A full report is provided each quarter which is used by the Board in its review of investment performance.

The overall return on the portfolio was 10.7% for the year to 31 March 2021 compared to 1.4% in the previous year. The significant improvement in performance year on year reflects the swift recovery in markets from the sharp falls in March 2020 due to the COVID-19 crisis. Support from governments and central banks brought the initial wave of recovery at the beginning of this 2020/21 financial year. The growth asset portfolio rallied in the quarter to 30 June 2020 with an overall return of 14.5%, owing to returns in excess of 20% from the global equity holdings with Artisan and LGIM. Over the year to 31 March 2021, all areas made a positive contribution, with most of the underlying managers performing in line with, or ahead of, their specific benchmarks.

During the year, markets responded to the ever-changing outlook on vaccine development, lockdown restrictions easing and tightening and variants of the COVID-19 virus. The overarching sentiment at the end of this financial year was one of optimism around the roll-out of vaccines, the reopening of economies and continued support from governments and central banks.


Whilst the recovery in financial markets from the lows of 31 March 2020 is welcomed and the outlook for global economic growth is positive and encouraging, the Investment Strategy Group remains vigilant of potential downside risks to these scenarios.

The likelihood and impact of risks to the investment portfolio are considered by the Investment Strategy Group at its quarterly meetings and any agreed actions and additional control measures are taken to the Board for approval. Alongside this we regularly instruct our investment advisers to perform and report on the results of stress testing scenarios.

It has been the objective of the Board to spread the risks of investment and to strengthen the investment portfolio so that it can meet such challenges. I take some comfort in the fact that our strategy has demonstrated its worth in these unprecedented times, protecting against significant market falls and also managing to capture the rebound from the COVID-19 market shock. The Investment Strategy Group continues to work to ensure the portfolio is positioned to meet its objectives and to be resilient to risks and volatility in so far as is possible now and into the future.

Christine Johnson
Chair of the Investment Strategy Group
20 August 2021