The pension fund also said it extended its private debt programme to 4.5% of the total fund with the award of four new mandates, including a first strategic allocation to real estate debt.According to the fund’s report the year under review also saw it finish a review of its direct investment portfolio, agreeing changes such as an increase in its overall capacity and in the target size of individual investments.As at the end of March the commitments in the direct investment portfolio made up 5% of the total fund, with the permissible range of 2.5-7.5%. The target investment size is £20-100m, with a minimum of £10m and a maximum of the greater of £200m or 1% of the total fund value.Infrastructure, renewable energy and credit commitments make up the bulk of the direct investments portfolio.Lothian rejigs allocation categoriesLothian Pension Fund, Scotland’s second largest LGPS with assets of £7.8bn, has changed the way it expresses its strategic asset allocation following a review of its investment strategies.The investment strategy used to be set at the broad asset class level of equities, index-linked gilts and alternatives, but the number of “policy groups” has been expanded from three to five: equities, gilts, non-gilt debt, real assets and cash.The strategic allocation was broadly unchanged, however, it said in its unaudited annual report.Last year the Scottish LGPS Advisory Board launched a consultation on possible structural reform of Scottish local authority pension funds, and Lothian said the prospect of this was “the most significant possible development” affecting it.In contrast to Strathclyde, Lothian came out in favour of structural change. The latter has an authorised internal asset management company that it shares with the schemes for two nearby local authorities.In its unaudited report for 2018-19, Lothian said partner funds were benefiting from its internal resources and it was sharing its costs, but there was not yet any significant impact on any of Lothian’s investments.“The arrangements are expected to evolve and for Lothian to benefit from greater overlap in investments,” it added. “The governance of Lothian’s collaborative arrangements is not straightforward. While other funds rely on advice from Lothian, they need to continue to be resourced appropriately to make decisions for their respective funds.“Further, there are practical constraints to the expansion of this type of collaboration.”Both Strathclyde and Lothian reported for the first time in their annual reports on their approach to climate change using the framework recommended by the Financial Stability Board’s Task Force on Climate-related Financial Disclosures. Investments made by Strathclyde Pension Fund, Scotland’s largest local authority pension fund and the UK’s second biggest, gained 5.9% in the year to the end of March for a “remarkable” 10th consecutive year of growth, according to its unaudited annual report.Returns were largely driven by the equity markets, the £21.9bn (€24.4bn) local government pension scheme (LGPS) noted. It gave its estimated funding level as 109%.Over the past few years the pension fund has been reducing its equity allocation in favour of a more diversified portfolio, and it reported agreeing at least £1bn of new investments during the 2018-19 financial year.These included £200m in an absolute return fund, £500m in global infrastructure, and seven investments with a total value of £205m by Strathclyde’s direct investment portfolio, its vehicle for alternative and local investments.