Our funding framework separates the funding requirements for current members from those of future claims.
To align with the separate funding requirements, our investment framework splits our assets into two portfolios: a matching portfolio and a growth portfolio.
Our matching portfolio allows us to manage the risk of changing interest rate and inflation rate by holding assets that will mimic the movements of our liabilities, commonly referred to as a Liability Driven Investment strategy (LDI). The objective for our matching portfolio is to be a fully funded interest rate and inflation hedging portfolio to pay our current members.
Our growth portfolio is primarily focussed on protecting and prudently building our reserves and is designed to generate a return with the aim of providing for future claims, increased longevity and other risks.
The allocation to each of our portfolios is approximately 50% of our total assets, although this is not a fixed target and varies over time.
Matching portfolio asset allocation
Permitted asset class |
Strategic allocation |
| Liability hedging instruments | 70% |
| Long-dated credit | 30% |
Growth portfolio asset allocation
Permitted asset class |
Strategic allocation |
| Global government bonds | 0% |
| Global corporate bonds | 6% |
| Emerging market debt | 5% |
| Public equity | 8% |
| Alternatives* | 52% |
| Absolute return strategies | 10% |
| Short duration sterling credit | 15% |
| Cash | 4% |
*including property, private equity, alternative credit, infrastructure, farmland and timberland.
For more information, read our full Statement of Investment Principles.