Investment Strategy - Update (October 2010)
Following recent articles in the press, the Trustee wishes to explain to members the Plan's investment strategy.
The Trustee has reduced, and continues to reduce, the level of risk within the Plan's investments. This has taken place in two ways:
- reducing exposure to equities, and
- hedging the interest rate and inflation risks inherent in the liabilities.
From 1 April 2006 to 31 March 2010 the Plan's total exposure to equities has reduced from 70% to 43%. The actual equity exposure of the Plan is currently close to 40% and there is no plan for this to increase. We have also interest-rate hedged 38% of the Plan's total liabilities.
Some of the Plan's physical equities were sold and replaced by futures contracts which represent a low-cost way of achieving passive equity market exposure. The Plan's total equity market exposure was not increased by this transition. The physical disposal proceeds enabled the Trustee to purchase index-linked gilts to further reduce interest rate risks within the Plan.
We hope that this gives reassurance that the Trustee has de-risked the Plan substantially and is committed to continue to do so.