The Church of England Pensions Board (CEPB) has achieved a “phenomenal” 30%-plus return since the start of the year from emerging market sovereign debt, according to its chief investment officer, Pierre Jameson.
Speaking to portfolio institutional, Jameson (pictured) said the £2.1bn CEPB increased the size of its EMD mandate in January following a review of the strategy.
For the nine-month period 1 January to 30 September the fund returned 34.6% and 36.4% for the rolling year to end of September, both after fees.
The bespoke mandate run by Colchester Global Investors is local currency denominated and makes up about 2.5% of the CEPB’s return-seeking portfolio. It screens out repressive regimes in accordance with the Church’s ethical investment policy.
The CEPB first invested in EMD in July 2014 and, according to Jameson, “it wasn’t a masterpiece at the time, but it’s started to go all right now”.
He added: “Actually, we subsequently reviewed the manager and we were entirely comfortable with them so we put some more money away in about January. Since then, the account has returned 30%-odd. It’s been a phenomenal return.”
Jameson said success had largely been down to “big positions in Brazil on the basis that a lot of the things that were hitting the price were unwarranted”.
However, he added: “There’s a large piece of recovery in that 30%. It’s a much more normal return since inception in July 2014.”
Elsewhere, the CEPB achieved another windfall after replacing its actively-managed index-linked gilt portfolio with two very long-dated index-linked gilt issues: the 2058 and the 2068. The move increased the scheme’s hedging position from 13% to 22%.
“The result of that is, because you’ve gone very long duration, you’re picking up much more interest rate and inflation exposure and you’ve actually got a much better hedge ratio for the same pound note investment,” Jameson said.
“We made the switch just before Brexit, and those long-dated bonds are up 50%. That’s quite extraordinary.”
Read the full interview online soon.
