Return
to Agenda
ITEM PF13
PENSION
FUND COMMITTEE – 26 NOVEMBER 2004
CIPFA LOCAL
AUTHORITY PENSION FUND INVESTMENT STATISTICS
Report by
the Head of Finance & Procurement
Background
- The WM Company,
which is an investment measurement service provider, had until March
2002 compiled the CIPFA statistics for Local Authority Pension Funds.
This service had been provided at no cost but from 1 April 2002 the
WM Company charged for this and as a consequence the number of measured
funds has fallen to 86 from a possible universe of 103. The total market
value of the funds measured was £78.3 billion at 31 March 2004.
- The Oxfordshire
Pension Fund is one of the 17 local authority pension funds that do
not use the WM Service because it already subscribes to the Russell
Mellon CAPS measurement service, which is owned by the Fund’s custodian
ABN AMRO Mellon. However, the Oxfordshire Fund is still able to compare
its investment performance against the reduced WM Company’s local authority
universe and this report summarises the main points of interest.
- The statistics
cover investment returns for the 3, 5 and 10-year periods ended 31 March
2004. The statistics also cover asset distribution, showing the percentage
weighting of funds in each major asset class e.g. UK equities, Overseas
equities.
Summary
of Results
- Annex 1, (download
as .doc file) Table 1 compares the Oxfordshire Pension Fund
asset distribution with other local authority pension funds and Oxfordshire’s
new customised benchmark, which was agreed by the Pension Fund Committee
following the asset liability study carried out in 2002. The asset distribution
of the Oxfordshire Pension Fund was broadly similar to the WM Local
Authority average universe at 31 March 2004.
- Annex 1,(download
as .doc file Table 2 compares the Oxfordshire Pension Fund’s
investment performance for 3, 5 and 10 year periods with the 86 local
authority pension funds measured. The table also compares investment
returns with the retail price index and average earnings.
- Annex 1,
(download as .doc file Table
3 provides the actuarial assumptions made at the 31 March 2001 valuation,
which applied to the three-year period ended 31 March 2004. When the
Actuary set his assumptions these were based on a very long-term time
horizon, but nevertheless it is interesting to note that the actual
3-year investment returns (Oxfordshire –2.2% and the local authority
average of –0.3%) fell well short of the Actuary’s longer term forecasts
of 7.25% for equities and 4.9% for Government Bonds. As a consequence
of the poor investment returns, over this three year period, all local
authority pension funds are expected to have deteriorating funding positions,
when the results of 31 March 2004 valuation results are announced over
the next few months.
- Annexes 2,
3 and 4 (download as .xls file) compare
in more detail the investment performance of the Oxfordshire Fund with
other English County Councils for the 3, 5 and 10 year periods. The
figures show that the Oxfordshire Fund’s investment performance was
below the average of other County Councils for all three periods. However,
unusually there was a very narrow dispersion in the three-year returns
with only a 3.7% difference between the top and bottom performing county
council funds, compared to 7.1% the year before. It should be noted
that Bedfordshire, Berkshire, Cheshire, Cornwall, Durham, Essex, Hampshire,
Nottinghamshire and Shropshire are not included in the above data.
- It was the Oxfordshire
Pension Fund’s poor investment performance in 2001/02 that prompted
the Pension Fund Committee to carry out an asset liability study in
the spring of 2002 and then a comprehensive review of the Fund’s management
arrangements, which culminated in a major management restructuring.
The main outcome of the review was the appointment of four new fund
managers in July 2003. The Audit Commission carried out a comprehensive
review of the Oxfordshire Pension Fund’s management arrangements in
2002/03 and praised the Council for "acting with commendable speed in
revising their whole Pension Fund management arrangements" and concluded
that "in summary, despite the poor performance, the Pension Fund is
well managed".
- The new management
structure has settled down very well and the latest performance figures
are extremely encouraging. Over the latest twelve-month period, to 30
September 2004, the Oxfordshire Pension Fund’s aggregate performance
was 12.4%, which places it as fourth best out of the sixty one local
authority pension funds so far measured by the WM Company. Furthermore,
the latest quarterly data shows that all four managers are beating their
respective benchmarks, which bodes well going forward.
RECOMMENDATION
- The Committee
is RECOMMENDED to receive this report.
SUE
SCANE
Head of Finance
& Procurement
Background papers: CIPFA Local Authority Pension Fund Investment Statistics
1994-2004. Actuarial Valuation Report 31 March 2001.
Contact
officer: Tony Wheeler, Pension Fund Investments Manager Tel: (01865)
815287
November
2004
Return to TOP
|