The last few weeks have been the most dramatic period for investors that most people can remember. Massive financial institutions on both sides of the Atlantic which were previously believed to be “too big to fail” have had to be bailed out or bought out or, in the case of Lehman Brothers, have simply collapsed.
Clearly, with our global investment policy, the Fund is affected by these events. We have been watching developments very closely and getting regular updates from our investment managers. We own shares in most big companies around the world, and that includes Lehman, HBOS, Freddie Mac, Fannie Mae, AIG and the other names which have been in the news. But we have around 3,000 different investments in total, so our investment risk is spread very widely.
The current value of the Fund will have fallen quite quickly. But as a long-term investor we should not be unduly concerned at current values. It is more important that we stick with our long-term strategy. We have taken action to address some immediate concerns. That includes closing some positions where Lehman was a counterparty. We have also temporarily suspended our securities lending programme in light of recent actions by regulators to curb short selling in the markets.
Scheme members should rest assured that whether they are currently receiving a pension from us or paying towards a pension, it will be unaffected by these events. We expect the value of the Fund to rise and fall but that has no bearing on our duty to pay pensions. And all of our current pensions payments are met from income.