Scottish Homes Strategy

The investment strategy for the Scottish Homes Pension Fund is designed to minimise funding level risk. It’s a relatively mature pension fund and is invested entirely in UK government securities (both index-linked and nominal gilts) and cash at 31 March 2021.  

The implementation of the strategy reflects the nature of the liabilities, some of which are fixed and some of which are index-linked. The investments match the interest rate and inflation sensitivity of the liabilities as closely as possible. In addition, the cash flow of assets matches with future pension payments up to one year beyond the next actuarial valuation (end March 2020) to minimise transaction costs and funding level risk. 

Actual Asset Allocation at 31 March 2021 

  • 60.1%  Index linked gilts
  • 30.4%  Nominal gilts
  • 9.5%  Cash 

Investment strategy 

The Fund's actuary estimated that the funding level of the Scottish Homes Pension Fund was 117.7% at 31 March 2020.  

The fund has, therefore, maintained its full funding objective ahead of the target originally agreed by the Scottish Government and the City of Edinburgh Council.  Achievement of full funding means that the Fund is able to minimise risk by investing solely in bonds, specifically UK gilts. These financial instruments move proportionately with liability values.  The actuary will next review and amend financial and demographic estimates based on actual experience at end March 2023.   

The strategic and actual asset allocations for the Fund at the end of the 2020 and 2021 financial years are shown in the table below. 

Asset Allocation

 

2020

2021

 

Strategic Allocation 

Actual Allocation

Strategic Allocation 

Actual Allocation 

Equities

-

-

Bonds

100%

99%

100% 

90% 

Property

-

-

Cash

-

1%

10%

Total 

100%

100% 

100% 

100% 

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