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Nilgosc


Investment Strategy

Objectives and Targets

NILGOSC aims to invest the assets of the Scheme prudently to ensure that the benefits promised to members are provided, and to provide reasonable stability in contribution rates for the employers. To meet this aim NILGOSC's overall investment objective is to exceed price inflation and general salary growth over long term periods.

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by consumers for a market basket of consumer goods and services. The annual percentage change in CPI is used as a measure of inflation and to index (i.e., adjust for the effect of inflation) the real value of wages, salaries and pensions to show changes in real values. NILGOSC’s actuarial valuation as at 31 March 2016 assumes a prudent investment return of 4.5% for the main group of employers, which is equivalent to CPI +2.5% (or Retail Price Index [RPI] +1.4%). In order to reduce the funding deficit, the aim of the Fund is to achieve investment returns above this level. The current overall investment target is to exceed CPI by 5% per annum, to be measured over a three and five year period.

Each fund manager has been set an individual performance target using indices applicable to the asset type and geographic market. The Committee monitors the performance of its investment managers by availing of Northern Trust’s performance measurement and reporting facility. 


Investment Strategy 

NILGOSC sets its long-term investment strategy by taking into account the nature and timing of the Fund’s liabilities identified through the triennial actuarial valuation and its investment aims and objectives. In setting the Fund’s investment strategy, NILGOSC first considers the lowest risk strategy that it could adopt in relation to the Scheme's liabilities. The investment strategy is designed to achieve a higher return than the lowest risk strategy while maintaining a prudent approach to meeting the Scheme’s liabilities.

These considerations drive decisions over asset allocation.  NILGOSC reviews the Fund’s asset allocation on an annual basis. In determining its asset allocation, NILGOSC considers:

  •  A full range of asset classes
  •  The risks and rewards of a range of asset allocation strategies
  •  The suitability of each asset class
  •  The need for appropriate diversifcation

The Fund's investments are diversified across various asset classes in order to increase the overall expected returns while reducing the overall level of risk.  A mixture of passive and active mandates are also used to capture the returns required to meet the Fund's objectives. 

The standard target and benchmark for each asset class held by the fund as at 31 March 2017 is shown in the following table:

Asset Class

Target/ Benchmark Indices

(Outperformance shown per annum)

UK Equities

 

FTSE All Share

FTSE All Share +2% p.a

FTSE All Share +4% p.a.

FTSE All World UK +2% p.a.

FTSE All World UK +3% p.a.

Overseas Equities

FTSE All World Developed Indices (ex UK) +2% p.a.

MSCI All Countries World (ex UK) +3% p.a.

FTSE All World Index (ex UK) +3% p.a.

FTSE All World North America Index

FTSE All World Developed Europe ex UK Index

FTSE All World Japan Index

FTSE All World Developed Asia Pacific ex Japan

FTSE All World Emerging

Bonds

Fixed Bonds

 

Index Linked Gilts


Barclays Capital Global Aggregate Bond Index +0.75% p.a.

iBoxx £Non Gilt ex BBB

FTA IL > 5Yrs

Property

Index Linked Property

Traditional Property


RPI +3% (from 31 March 2014. Previously RPI only)

IPD Quarterly Universe +1% p.a.