Interview – Wiltshire Pension Fund
Our multi-asset portfolio holds equities and debt. We have, as I mentioned private equity and a dedicated allocation to renewable infrastructure and climate solutions, which we are going to build up over the next year or so. We also have multi-asset credit, lots of property and pri- vate debt. Then we have a little bit in gilts and an allocation to affordable housing. So we have a dual mandate of delivering returns and making positive social and environmental impacts.
Why have you introduced the new asset classes to the portfolio?
The private markets are there to boost returns, but also to diversify.
How would you describe your investment strategy?
It is diversified and quite progressive. It has a lot of things in there that are looking to the future. We have a goal of having 30% of the portfolio allocated to sustainable or low carbon assets by 2030. And we are almost there. It’s 28.2% at the moment.
The value of your fund has increased. What do you attribute that to?
It depends what period you are looking at. We are reporting annual accounts to the end of March now and we actually saw a bit of a dip during that year. It’s been quite challenging. If you look back over the past four years, we were slightly in excess of the expected actuarial investment return. A lot of that was driven by having good exposure to growth stocks and particularly some tech stocks, which benefited from the work from home trend. In general, obviously less so over the past year, growth has done well historically and we have been overweight to it. But I would put it down to being well diversi- fied. We do not tend to chop and change; we just strategically think where we want to be and sit there.
You have set a goal to reach net zero by 2050. How’s that going?
14 | portfolio institutional | July-August 2023 | Issue 125
When we set that goal, it was as a result of the modeling that showed the fund would be in a better financial position in a sub 2-degree warming scenario. That’s why we set
the goal. It was financially
motivated. We looked at a goal of net zero by 2030, but you just cannot get the investments to get to net zero by then and still get the returns. So we set 2050. We thought we’d align it with what the UK is trying to do overall and with the Paris Agreement. We are broadly on track. We started off looking at our equity port- folios but have expanded it as the target applies to the whole portfolio. For our equities, we can look at the carbon foot- print, the weighted average carbon inten- sity. In the other parts, like, for example, our property funds, we will look at the underlying funds and ask whether they have set net-zero targets for 2050 or sooner. In some ways we are tackling it directly through our allocation to renewa- ble infrastructure and climate solutions. We are setting engagement targets as well. We use consultants for this. They give us some analysis of what is in our portfolio and which investments are aligned, which are not and which are the heaviest emitters. Sometimes you don’t just want to sell the heaviest emitter. It depends whether they have a chance to
decarbonise and if they are going to change. We want to be financing that to make that change happen.
It requires quite a lot of in-depth looking at things from the bottom up. We have set the top-down target, but then we are look- ing into individual stocks and asking: “Why is that in the portfolio? Are we happy with it?”
You produce a stewardship report. What does that contain and why is it important? The point of the report is firstly to share information on what we are doing in this area. But it is also in-line with the Stew- ardship Code’s reporting requirements. We have to submit this annually to the Financial Reporting Council in order to maintain our signatory status of the Stew- ardship Code.
If you have read the whole report, they are chunky. So what we do is make a mini magazine to go alongside it, which tries to explain, in an easy to read way, why we do what we do.
What do you see as your big challenges on the economic front and how will these shape your investment strategy? Inflation is the big issue. We are going to have to re-run the modeling to see if we are cashflow positive or negative. This is super important to us as a pension fund because
We would be delighted to invest in UK infrastructure, but it has to give us the returns. That’s the point.
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