Barclays 2012 Annual Report Download - page 301

The strategic report Governance Risk review Financial review Financial statements Risk management Shareholder information
37 Pensions and post-retirement benefits continued
Assets
A long term investment strategy has been set for the UKRF, with its asset allocation comprising a mixture of equities, bonds, property and
other appropriate assets. This recognises that different asset classes are likely to produce different long term returns and some asset classes
may be more volatile than others. The long term investment strategy ensures, amongst other aims, that investments are adequately diversified.
Asset managers are permitted some flexibility to vary the asset allocation from the long term investment strategy within control ranges agreed
with the Trustee from time to time.
The UKRF also employs derivative instruments, where appropriate, to achieve a desired exposure or return, or to match assets more closely to
liabilities. The value of assets shown reflects the actual physical assets held by the scheme, with any derivative holdings reflected on a mark
to market basis.
The value of the assets of the schemes, their percentage in relation to total scheme assets, and their expected rate of return were as follows:
Analysis of scheme assets
Total Of which relates to UKRF
Value
£m
% of total
fair value of
scheme
assets
%
Expected
rate of
return
%
Value
£m
% of total
fair value of
scheme
assets
%
Expected
rate of
return
%
As at 31 December 2012
Equities 6,360 26.4 n/a 5,783 25.3 n/a
Bonds 10,963 45.5 n/a 10,575 46.3 n/a
Property 1,244 5.2 n/a 1,228 5.4 n/a
Derivatives 1,637 6.8 n/a 1,637 7.2 n/a
Cash 3,240 13.4 n/a 3,118 13.6 n/a
Other 652 2.7 n/a 504 2.2 n/a
Fair value of scheme assets 24,096 100 n/a 22,845 100 n/a
As at 31 December 2011
Equities 4,979 21.9 7.8 4,452 20.7 7.7
Bonds 11,246 49.4 3.8 10,872 50.5 3.7
Property 1,389 6.1 6.2 1,356 6.3 6.1
Derivatives 1,296 5.7 – 1,296 6.0 –
Cash 3,253 14.3 0.6 3,167 14.7 0.5
Other 585 2.6 4.4 397 1.8 2.5
Fair value of scheme assets 22,748 100 5.1 21,540 100 5.0
Included within fair value of scheme assets were: £7m (2011: £15m) relating to shares in Barclays Group, £3m (2011: £12m) relating to bonds
issued by the Barclays Group, and £1m (2011: £12m) relating to property occupied by Group companies. The UKRF also invests in pooled
investment vehicles which may hold shares or debt issued by the Barclays Group. The UKRF scheme assets also includes £240m relating to UK
private equity investments (2011: £50m) and £1,174m relating to overseas private equity investments (2011: £1,342m). These are disclosed above
within Equities.
The expected return on assets is determined by calculating a total return estimate based on weighted average estimated returns for each asset
class. Asset class returns are estimated using current and projected economic and market factors such as inflation, credit spreads and equity risk
premiums. The Group actual return on scheme assets was an increase of £1,385m (2011: £2,595m increase), of which £1,249m (2011: £2,564m)
relates to UKRF.
The overall expected return on asset assumption has been based on the portfolio of assets created after allowing for the net impact of the
derivatives on the risk and return profile of the holdings. As at 31 December 2012, the expected rate of return is not applicable due to the removal
of the expected return on scheme assets under IAS 19 Revised, effective from 1 January 2013.
Approximately a third of the UK Retirement Fund assets are invested in liability driven investment strategies; primarily UK gilts as well as interest
rate and inflation swaps. These are used to better match the fund’s assets to its liabilities. The swaps are used to reduce the scheme’s inflation and
duration risks against its liabilities.
barclays.com/annualreport Barclays PLC Annual Report 2012 I 299