Pension Protection Fund, London, will cut its equity allocation in half to increase its alternatives investments, including the £4 billion ($6 billion) fund's first move into private equity, according to the fund's new statement of investment principles.
Cash and bonds will remain at a combined 70% of assets, but public equity will be reduced to 10% from 20%, according to the new target allocation released today. Alternatives — 7.5% of total assets in real estate and 2.5% in global TAA — will rise to 20%. In addition, the types of assets to be included in the alternatives portfolio will be broadened to also include private equity, infrastructure and absolute-return strategies.
Exact allocations to alternatives subcategories have not been determined.
“Our priority is to maximize the impact of our investments so that we get more return by diversifying into additional asset classes but with the same level of risk as before,” PPF Chief Executive Alan Rubenstein said in a news release about the new target allocation. “A higher long-term performance is clearly in the best interests of those people who receive our compensation and of our levy payers.”
Information on how existing managers will be affected was not available by press time. According to the statement, however, “this portfolio will change over time with future transfers of the pension schemes.”
The fund's managers are Auriel Capital Management, Aviva Investors, Goldman Sachs Asset Management, Insight Investment Management, Lazard Asset Management, Mondrian Investment Partners, Newton Investment Management, PIMCO, Rogge Global Partners and SSgA.
Additionally, environmental, social and governance principles will be broadened from U.K. equities to include all of the fund's investments. “The board expects its fund managers, where appropriate, to have integrated ESG factors as part of their investment analysis and decision-making process,” according to the statement. “Appropriate weight will be given to ESG factors in the appointment of fund managers.”