ITEM PF19
PENSION FUND COMMITTEE – 13 DECEMBER 2007
CIPFA LOCAL AUTHORITY PENSION FUND INVESTMENT STATISTICS
Report by the Assistant Chief Executive & Chief Finance Officer
Background
1. WM Performance Services, who were appointed as Oxfordshire’s investment measurement service provider on 1 April 2005, are responsible for compiling the CIPFA statistics for Local Authority Pension Funds. In 2006/07 88 local authority pension funds, with a total market value of over £124 billion, were included within this service.
2. The statistics cover investment
returns for the 3, 5 and 10-year periods ended 31 March 2007. The statistics
also cover asset distribution, showing the percentage weighting of funds in
each major asset class e.g. UK equities, Overseas equities, property etc.
Summary of Results
3. Annex 1, Table 1 compares the Oxfordshire Pension Fund asset distribution at 31 March 2007 with other local authority pension funds, private sector funds and Oxfordshire’s own strategic benchmark.
4. Oxfordshire’s asset allocation was broadly in line with other local authorities, though there were a few differences. Oxfordshire had a lower weighting in UK Equities (32% versus 38%) and a higher weighting in cash and other investments, (13% versus 6%). Other investments include private equity, hedge funds and tactical asset allocation funds, where the Oxfordshire Pension Fund has a high exposure relative to other local authorities.
5. Another feature worth noting in Table 1 is the difference in asset allocation between local authority and private sector funds. This shows that local authorities have a higher exposure to UK equities but a lower exposure to index linked bonds compared to private sector funds. The need for companies to report their pension fund deficits in their balance sheets means they are obliged to take no more than a five to ten-year view on their pension fund investments, which tends to drive them to a higher bond weighting. Furthermore, the large closure of final salary pension schemes in the private sector and the associated increase in their maturity profiles also lends support to a higher bond weighting to match their liabilities, whereas local authority pension schemes are less mature and able to take a longer term view on their investments.
6. Annex 1, Table 2 compares the Oxfordshire Pension Fund’s investment performance for 3, 5 and 10-year periods with the 88 local authority pension funds measured. The table also compares the investment returns against the retail price index and average earnings.
7. Annex 1, Table 3 provides the actuarial assumptions made at 31 March 2004 valuation, which apply to the three-year period ending 31 March 2007. The assumptions provide both three yearly and longer-term investment return assumptions. The investment returns over the three year period show that the actuarial assumptions were exceeded. However, it should be remembered that this report only considers the performance of the Pension Fund’s investment assets, which are only one side of the actuarial equation.
8. Annexes 2 to 4 compare in more detail the investment performance of the Oxfordshire Pension Fund with other English County Councils for the 3, 5 and 10 year periods. One pleasing feature is Oxfordshire’s vastly improved three year investment performance. Three years ago, Oxfordshire was the worst performing county council over the three year period but the major management changes made in July 2003 have proved successful. If the Fund maintains its recent investment performance trend then it should also start to move up the five and ten year league tables.
RECOMMENDATION
9. The Committee is RECOMMENDED to receive this report.
SUE SCANE Assistant Chief Executive & Chief Finance Officer
Background papers: CIPFA Local Authority Pension Fund Investment Statistics 1997-2007. Actuarial Valuation Report 31 March 2004.
Contact officer: Tony Wheeler, Pension Fund Investments Manager Tel: (01865) 815287
December 2007
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