At Border to Coast, we oversee the investment of pensions assets for our Local Government Pension Scheme Partner Funds. We develop and operate a variety of internally and externally managed investment across a range of asset classes in both public and private markets.
To ensure our listed equity and fixed income funds are measured against appropriate standards of reference, we ‘benchmark’ each fund’s performance against a market index comprised of similar investments. Our Alternative investments are measured against long term IRR (Internal Rate of Return) targets as there is no recognised market.
All of our investment decisions integrate the evaluation of Environmental, Social and Governance (ESG) factors, in line with our Responsible Investment Policy.
Equity funds generally invest in publicly traded stocks or other securities which represent an ownership interest in a company. Owning stock in a company over time may yield capital gains or stock price appreciation as well as dividends for shareholders.
UK Listed Equity Fund
Our internally managed UK Listed Equity Fund was one of the first funds to be launched at Border to Coast, in July 2018. The Fund invests in listed equities offered by companies on the UK market, using fundamental analysis to identify long-term, quality companies with strong balance sheets. The Fund uses a low-turnover, low risk approach with a view to out-perform the benchmark by 1% a year.
Benchmark: FTSE All Share Index
Overseas Developed Markets Equity Fund
The Overseas Developed Markets Equity Fund invests in listed equities issued by overseas companies in developed countries. The Fund is internally managed as four separate, geographically focussed portfolios – Japan, Pacific ex-Japan, Europe ex-UK, and the United States – to ensure that the Fund has suitable exposure to a range of markets. The Fund will aim to out-perform a composite benchmark by 1% a year, by focussing on attractive valuations and strong balance sheets.
Benchmark: A composite of region-specific indices: 40% S&P 500, 30% FTSE Developed Europe ex-UK, 20% FTSE Developed Asia Pacific ex-Japan, 10% FTSE Japan
Emerging Markets Equity Fund
Our internally managed Emerging Markets Equity Fund invests in listed equities issued by companies operating in emerging market economies. Emerging markets include some already influential nations which are still experiencing growth, such as Brazil, Russia, India and China, as well as various other countries undergoing economic reform across Africa, Latin America, South East Asia, and Eastern Europe. Targeting annual net returns 1% above the benchmark, the Fund provides opportunity for long-term out-performance predominantly through stock selection, emphasising companies with rapid growth and high returns characteristics, although there are additional currency, and sector risks
Benchmark: S&P Emerging Broad Market Index (BMI)
UK Listed Equity Alpha Fund
The UK Listed Equity Alpha Fund invests in listed equities offered by companies on the UK market. This this fund is externally managed, combining three complementary investment strategies from UBS, Janus Henderson, and Baillie Gifford. Through this blend, the UK Listed Equity Alpha Fund targets slightly higher out-performance, aiming to generate annual net returns 2% above the benchmark.
Benchmark: FTSE All Share Index
Global Equity Alpha
The Global Equity Alpha Fund is our largest fund to date. The Fund is externally managed, combining five complementary investment styles to create a broad portfolio of listed equities across a global geography. Loomis Sayles, Harris Associates, Lindsell Train, and Investec Asset Management were appointed as managers for this Fund, as we believe this blend of strategies and management styles will be most conducive to outperformance. The Fund will target annual net returns 2% above the benchmark.
Benchmark: MSCI All Countries World Index
Fixed income funds invest in various listed credit asset classes, including debt, funds, and asset-backed securities. Income is usually generated via fixed interest payments over a number of years, combined with an eventual repayment of the principal invested capital when the product matures.
UK Investment Grade Credit Fund
The UK Investment Grade Credit Fund combines three complementary external managers – Royal London Asset Management, M&G Investment Management, and Insight Investment – to form a varied portfolio of high quality corporate or supranational credit holdings, targeting annual net returns 0.6% above the benchmark. The Fund will focus on the UK market, and will aim to deliver excess returns through diligent credit research combined with a long-term, active credit management philosophy.
Benchmark: iBoxx GBP Non-Gilts
Multi-Asset Credit Fund
The Multi-Asset Credit (MAC) Fund is expected to launch in early 2021. The Fund will bring together a range of higher risk or structured credit asset classes which are collectively expected to produce higher annual net returns than our other fixed income funds, targeting 3-4% above a cash benchmark. The Fund will be externally managed via a ‘core-satellite’ manager structure, combining the investment strategies of our core MAC manager, PIMCO, and several satellite managers who will each specialise in a specific credit asset class. The specialist sleeves will cover Securitised Credit, Global High Yield, Emerging Market Debt, and Leveraged Loans. A portion of the Emerging Market Debt sleeve will be internally managed.
Benchmark: SONIA (Cash)
Sterling Index-Linked Bond Fund
The Sterling Index-Linked Bond Fund is planned for a launch in the second half of 2020. The Fund will be internally managed and will primarily invest in index linked, sterling denominated bonds issued by HM Treasury in the UK (‘Gilts’). Additionally, the Fund has some scope to invest in off-benchmark positions in order to increase potential returns, in other bonds issued by the UK Government, as well as Government-equivalent or investment grade bonds. The Fund will target returns 0.25% above the benchmark.
Benchmark: FTSE Actuaries Index Linked Gilts Over 15 Years Index
Alternative investments represent any type of investment not listed on a recognised market. This can include investment in private companies, infrastructure assets, or private debt instruments. Due to the lack of a recognised market alternatives tend to be less liquid but, depending on the nature of the investment, can offer attractive returns over the long term.
The Private Equity fund aims to invest into private companies via equity positions, with the objective of delivering a long-term annual net return of 10%. Investments will be made across a range of strategies (‘Buyout’, ‘Special Situations’, ‘Growth’ and ‘Venture’), global geographies and company size. Such investments typically provide long term capital to privately traded companies in order to support growth or provide liquidity to shareholders.
The Infrastructure fund targets investments into infrastructure assets and related companies, with the aim of delivering long-term annual net returns of 8% generated through a combination of income and capital return. Infrastructure investments, which can be debt or equity, provide exposure to assets that deliver, or facilitate, essential services which support economic growth, generate productivity and underpin societal and business operations.
The Private Credit fund seeks to invest in a variety of private credit instruments, which could include ‘commingled’ funds and co-investments. Private credit investments typically provide capital to privately held companies to support growth, refinancing, mergers and acquisitions, or to provide liquidity or capital structuring solutions. Private Credit is generally considered to be lower risk than public or private equity, and the portfolio therefore has slightly lower return targets of 6% a year over the long term.