Nuffield Foundation – Interview


going to make you the most money? The portfolio has been the same for 15 years. When we first set the portfolio up, we moved away from a single manager who took all the decisions to making the investment asset allocation decisions our- selves. We had a more conventional port- folio: a UK allocation, a separate overseas allocation, a bond manager, some property and some private equity. Over the next couple of years, as we digest- ed what was going on, we dropped the property allocation because that had liquid- ity issues like private equity but without the


additional return. So, why own property, we thought, if you could have private equity instead for your illiquidity tranche? Later we dropped the regional equity allocations, shifting to global mandates.


And you have never fundamentally changed that approach? At the height of the financial crisis, we were persuaded to have some form of syn- thetic product for gilts to get some mar- ginal yield pickup. When we looked at all the counterparties we thought: “This is not what we want.”


So, we now own the gilts directly. We only hold Bank of England short-dated gilts and we expect no return from them. It is absolutely safety. We feel happy with the risk we are taking.


How is each component part broken down? What are the gilts, global equities and private equity?


The portfolio is constructed on the basis of having an amount of money, which under all circumstances is safe: 10% in short-dated UK gilts – and if there is a problem


with the counterparty then Issue 110 | February 2022 | portfolio institutional | 13


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