Investment matters The Trustee’s investment strategy focuses on a diverse range of assets, which has remained largely consistent over the last year. The Trustee and its advisers continue to monitor the impact of geopolitical events on the Scheme’s investments (for example, the results of the US election and the heightened tensions in the Middle East). They review the various market and Scheme-specific implications of each development to ensure that potentially volatile market environments are managed effectively. The Scheme’s investment strategy is well-diversified and effectively hedged/protected against interest rate and inflation movements, so the impact of these current events on the Scheme’s funding position to date has been minimal. Investment performance The table shows the estimated total return on the Scheme’s invested assets over the 12 months and three-year period to 31 December 2024, and compares it with a benchmark set by the Trustee’s investment consultants. As you can see, the Scheme’s investment outperformance relative to the benchmark implies that the managers used by the Trustee have, as a whole, produced returns that are better than expected.
1 year (%)
3 years (% p.a.)
Scheme return*
(5.1) (7.2)
(13.6) (14.0)
Composite investment manager benchmark**
+2.1
+0.4
Scheme outperformance
Source: Barnett Waddingham. Performance shown is for periods to 31 December 2024 *This is the estimated total return on the Scheme’s invested assets, i.e. excluding the value of the Asset Backed Contribution (ABC) arrangements agreed between the Trustee and RTX. **This measure provides an indication of the combined return the Scheme’s investment managers would have been expected to produce over the period, based on their underlying performance targets. While the Scheme’s assets have fallen in value over the period, they fell to a lesser extent than the actuarial value placed on the Scheme’s liabilities. This has led to an improvement in the funding position over the period (the funding position is the extent to which the assets cover the value placed on the future liabilities). The value of the Scheme’s assets fell over the period primarily due to their exposure to fixed and inflation-linked UK Government bonds, which reduced in value as global central banks increased interest rates to control price inflation following the Covid-19 pandemic. These assets are held to back future benefit cashflows with low-risk income. They also serve a useful role in helping protect the Scheme’s funding position by hedging movements in the actuarial value of the liabilities caused by changes in interest rate and inflation expectations.
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