The Fund invests in financial assets for the primary purpose of obtaining a return in terms of both investment income and increased capital value. Cash based deposits and investments in fixed income are subject to interest rate risks, which represent the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Panel and its investment advisors regularly monitor the Fund's interest rate risk exposure during the year. The fund has determined that a +/- 100bps change in interest rates is sensible for the interest rate risk sensitivity analysis.

The table below demonstrates the change in value of these assets had the interest rate increased or decreased by 100bps. It should be noted that an increase in the interest rates results in a decrease in the value of the portfolio and vice versa. The analysis assumes that all other variables, in particular exchange rates, remain constant.

Currency risk represents the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Fund is exposed to currency risk on financial instruments that are denominated in any currency other than Sterling but diversifies this risk by investing in securities in multiple currencies. Management recognises that a strengthening or weakening of the pound against the various currencies in which the Fund holds investments would increase or decrease the net assets available to pay benefits accordingly.

The Fund does not hedge against currency risk on a long-term basis, as the movements in foreign exchange rates can lead to losses as well as gains. Overseas equities, some private debt and infrastructure securities, cash in foreign currencies, and some elements of the pooled investment vehicles are exposed to currency risk.