INVESTMENT PHILOSOPHY

Underperformance and volatility are key risks which are addressed by clear and appropriate short- and long-term targets, measured against the actuarial assumptions for defined benefit schemes, and inflation and the market for defined contribution schemes. There are specific volatility targets.

Assets behave differently in different economic scenarios and market conditions and this should be reflected in asset allocation decisions.

Investment risk should be spread amongst different asset classes to provide more stable returns.

Cheviot focuses on materially financial issues likely to impact risks and returns. The Investment Committee considers the impact of all known financially material factors, including ESG, when appointing or reviewing managers.

Cheviot believes that the benefits of investing in pooled funds outweigh the limitations of being able to influence the engagement activities or investment approach (including consideration or integration of ESG factors). Managers are required to provide information about their approach and processes in respect of stewardship and ESG.

Balancing returns with stability of those returns is a key element of the strategy adopted across the Trust.

The decision about investing in illiquid assets is based on an evaluation of the premium payable for locking up assets with less liquidity. The premium payable needs to be sufficient to compensate for the lack of liquidity. A key factor in this analysis is the relatively short time horizons of the Cheviot defined benefit schemes and the requirement for daily dealing for members in the Cheviot pension.