Currency risk
The Scheme’s liabilities are denominated in sterling. The Scheme may gain exposure to overseas currencies by investing in assets that are denominated in a foreign currency or via currency management. Currency hedging is employed, as appropriate, to manage the impact of exchange rate fluctuations. The risk of loss of assets by each investment managers and the appointed custodian and sub- custodians are considered on appointment and reviewed periodically by the CIF Administrator/the Trustee. This includes losses beyond those caused by market movements (e.g. default risk, operational errors or fraud). The CIF Administrator/the Trustee undertakes periodic reviews of the internal controls and processes of its custodian and each of the investment managers. The Trustee is aiming to be in a position to be in a low dependency position in the mid- 2030’s . At or before this point it may be viab le to secure some or all of the Scheme’s liabilities with an insurer through a bulk annuity policy. The Trustee acknowledges that the value of the Scheme’s liabilities when priced by an insurer is likely to be materially different to the value on other funding measures, e.g. low dependency/self-sufficiency. The asset allocation required to minimise volatility in the funding position on the buy-out basis will also likely be different to that required on other funding measures. As the Scheme moves closer to being able to secure member benefits with an insurer, this position will be monitored more closely by the Trustee.
Loss of assets
Buy-out pricing mismatch
8 Expected return on investments
8.1 In setting its investment strategy, selecting asset classes and investment managers, the Trustee has regard to the investment return that each asset class is expected to provide alone and in combination. The Trustee is advised by its professional advisors on these matters 8.2 The Trustee requires the Scheme’s assets to produce a return in excess of the discount rate used to determine the Scheme’s Technical Provision and in line with the expected return presently required under the de-risking framework. In addition, the expected return would also be required to meet the requirements requirement of any Recovery Plan in place at a future date (this requirement does not apply at the time of preparation of the current Statement).
9 Realisation of investments
9.1 The Trustee makes disinvestments from the investment managers with the assistance of its advisers and administrators, as necessary, to meet the Scheme’s cashflow requirements.
10 ESG-related risks, view of members, the exercise of voting rights, engagement activities, manager incentivisation and conflicts of interest
10. The Trustee has set policies in relation to these matters. These are set out in the Appendix .
UTC (UK) Pension Scheme | Statement of Investment Principles | 22 August 2023
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