SHL employs a mix of passive and active management throughout its equity portfolio with holdings in both single manager funds and index linked ETFs. While tending to avoid the microcap end of the spectrum, SHL invests broadly across the equity universe with holdings in small to large capitalisation corporations in most major markets across the globe. At its highest level, the portfolio’s aim is to exceed the return generated by the MSCI World Index on a net dividends reinvested basis.
SHL’s fixed income portfolio acts as a stabiliser and provider of liquidity for other investment opportunities. The portfolio is actively managed with the term of holdings varying according to a variety of factors including the shape of the respective yield curves and SHL’s outlook for official interest rates. While relatively conservative in comparison to its peers in other investment sectors, the portfolio aims to achieve a return in excess of prevailing cash rates.
SHL’s alternative holdings span a broad array of strategies ranging from long/short equity to event driven and distressed securities. The underlying managers within the portfolio tend to be located in Europe and the United States although their investment mandates often extend to investment markets worldwide. The alternatives portfolio is designed to provide both downside protection and access to niche strategies that can typically not be accessed via traditional long equity investment. It also meets SHL’s preference for absolute rather than relative returns.
SHL saw the opportunities presented by private equity at an early stage and has been making such investments since the early 1980s. While typically opting for a fund based investment strategy, SHL will on occasion take a direct stake in a growing business as part of its overall private equity portfolio. The focus of the portfolio is relatively broad with SHL’s underlying funds investing in early stage, venture and buy-out opportunities. Although returns can be heavily influenced by the stage of the economic cycle, the portfolio aims to achieve a net IRR in excess of 15%.
In addition to a range of key market real estate funds, SHL’s real asset portfolio comprises both direct and indirect investments in what would traditionally be regarded as the commodities sector. As such, the portfolio holds investments in the energy, materials and natural resources (eg timber) sectors, amongst others. The portfolio aims to benefit from increasing demand for scarce resources with the investment horizon keeping in line with SHL’s overall long term view.