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Defined Benefit

PPF reports 2.8% return in FY 2018

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The Pension Protection Fund, London, delivered a 2.8% investment return for the fiscal year 2018, pushing assets to £29.9 billion ($42 billion).

The lifeboat for the defined benefit funds of insolvent U.K. companies said in its annual report and accounts that assets grew 4.2% for the period.

The investment return compared to a 3.9% return for the 2017 fiscal year. The biggest contributor to the investment return in the 2018 fiscal year was public equities at 11.2%. Further details on investment returns were not immediately available.

The funded level grew to 122.8% as of the end of March, vs. 121.6% a year earlier. The fund's reserves, assets over and above what the PPF estimates is needed to pay every current participant and their dependents their full benefits for life, increased 9.8% to £6.7 billion.

The PPF took on £1.2 billion in deficits in fiscal year 2018, compared with about £270 million the previous year.

The PPF's strategic asset allocation is 58% cash and bonds, 22.5% alternatives, 12.5% hybrid assets, which are illiquids with hedging characteristics, and 7% equities.

Over the fiscal year the PPF continued its work to bring in-house management of its assets. It already internally manages liability-driven investment strategies and a cash strategy introduced in October. "We are in the planning phase of bringing part of our credit portfolio in-house as well and expect to insource part of this portfolio in 2018-'19," said the report. "We may also look to insource other asset classes in the future, when we have the necessary resource and expertise in place to do so."

Money management fees fell to £127.5 million, from £140.4 million for the fiscal year 2017.

"In a year that saw the largest value of claims made on the PPF than in any other year, we not only demonstrated an ability to withstand these events but were able to grow our reserves to £6.7 billion and increase our funding ratio to 122.8%," wrote PPF CEO Oliver Morley, in the report. "We also delivered strong investment performance this year. We exceeded our target and I'm pleased to report that our funding strategy is well on course. The PPF remains robust despite a backdrop of economic uncertainty and financial volatility, we're confident that we can continue to achieve our mission of paying the right people, the right amount, at the right time."