The £12.9bn (€17.6bn) BBC Pension Scheme returned 20.1% over the year to April, backed by its exposure to long-dated UK bonds and global equities.

The pension fund for employees of the UK’s public broadcaster, however, said the long-dated bonds, while adding to performance, also hampered the scheme’s ability to meet its 2026 funding target.

Chairman Bill Matthews said property, infrastructure and private equity also played a role, as did the pension fund’s lack of exposure to commodities.

“The scheme reduced its equity exposure when the market was high and purchased assets that offer the prospect of stable long-term cash flows, such as UK corporate bonds, infrastructure investments and properties with long leases,” he added.

“It has not bought more UK government bonds at current yield levels.”

The performance marked the sixth successive year of positive returns, with the fall in yields on long-term UK Gilts and index-linked Gilts corresponding to a short-term return and rise in asset value.

This, however, failed to help the scheme meet its 24% benchmark target. Liabilities also increased over the period.

The scheme has built up its liability-driven investment (LDI) portfolio over the last two years, with its annual report suggesting it was now £1bn better off for having increased exposure without significantly reducing growth assets.

Despite global equities returning 16.6%,10 percentage points above UK equities, the scheme still reduced overall exposure to the asset class by 5.1 percentage points.

The scheme now has a 28.4% equity allocation – 10.5% in the UK and 11% across the US and Europe.

Return-seeking bond exposure rose to 7.5% from 6.6%, while private markets rose to 22.5% from 19.9%.

The main change in asset allocation came in index-linked UK Gilts, forming part of the scheme’s LDI portfolio.

The scheme now holds 33.9% of its assets in inflation Gilts compared with 23.5% in 2014 – stemming mainly from trimming equity holdings.

It holds £4.2bn in UK index-linked government bonds compared with £336m in UK corporate bonds.

As of April this year, the scheme still had a funding shortfall of around £2bn.

The scheme, which closed to new entrants in late 2010, is planning to offer around 16,900 members the chance to take part in the pension increase exchange, which, at retirement, sees members offered higher up-front benefits at the cost of future statutory increases to inflation.

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