West Midlands Pension Fund, Wolverhampton, England, is targeting a 25% allocation to alternative investments in the next year, up from the current 21%, said Judy Saunders, CIO of the £8 billion ($15.6 billion) fund. Speaking at the Alpha Max 2008 Conference in Madrid, Ms. Saunders said the fund is looking to improve risk/return efficiencies and further diversify the funds portfolio, which returned 7.9% in 2007. Funding will come from a combination of cash and a reduction in equities, Ms. Saunders said.
The fund has been gradually expanding its alternatives portfolio, which was at 15% of total assets as of March 31, 2007, according to a valuation report. At that time, about 9% of total assets was invested in real estate and the remainder in other alternatives. The expanded alternatives strategy will target a 7% allocation to private equity, 10% to real estate and 8% to other alternative assets, including commodities. Increased exposures to infrastructure, emerging market debt and active currency are being considered.
We have a very flexible approach to allocation, Ms. Saunders said. It depends on where we see the opportunities.