Investment Review

Alex GracianChief Investment Officer

To the end of September 2013?

•The LPFA Fund:£4.714 bn on Sept 30th 2013.

Return•Quarter 0.92%•YTD 8.74%•1yr 11.39%•3yr 7.7%

What has the Fund returned

• Memorable events• Abenomics• Bernanke’s summer tapering event that never was – market over

reacted• Carney’s interest rate guidance – too many getting out of jail cards• Recent rapid growth predicted for the UK – from a lingering patient

to rapid recovery• Positive growth rate in Spain – all be it small but is a glimmer of

hope

Financial Markets

LPFA Portfolio Performance

60/40 Portfolio – A hypothetical portfolio comprised of 60% International Equities and 40% UK Government bond rebalanced quarterly. NB: Unaudited returns – For illustrative purposes only

Asset Class Returns

Source: Bloomberg – Net Total Returns in GBP

Major Equity Market Returns UK Government Bonds

The Fund Asset Allocation

Distribution at 30th September 2013:

Asset Class % of the Fund

LDI 6.8Global Equity 47.0Bonds 22.3

Alternative assets (PE/Infrastructure/Property) 13.3Total Return 8.2Cash 2.4Total 100

What are we doing?

• Bearing in mind the big economic picture• Do what we do best – manage the assets intelligently and for the

long term• Invest innovatively e.g. synthesising equities• Build up the quantitative ability to analyse risks and look for

investment opportunities• Build up asset liability modelling capability to better manage

assets & liabilities• Build up an illiquid portfolio to harvest the illiquidity premium• Build up the team skills to bring more work in house to save on

fees

• Completed the asset review and agreed on an overarching asset allocation framework

• Building the investment team to enhance investment returns

• Backfilling the asset allocation details• Made some new illiquid asset investments e.g. Bridges• Refining our process in finding good liquid investment

managers/opportunities• Enhancing our capability to closely monitor liabilities in

house

What have we done so far this year?

• We are in it all together and for the long term

• We set ourselves target to achieve an expected real return of 3.5% to 4% to close the funding gap – a tall order but not impossible to achieve!

Conclusion