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ITEM PF16
PENSION
FUND COMMITTEE – 21 NOVEMBER 2003
CIPFA LOCAL
AUTHORITY PENSION FUND INVESTMENT STATISTICS
Report by
the Head of Finance
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 fell from 93 to 81 out of a possible universe of 103 funds. The
total market value of the funds measured was £65.9 billion at 31 March
2003.
- The Oxfordshire
Pension Fund is one of the 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
2003. 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, 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.
- The asset distribution
of the Oxfordshire Pension Fund was similar to the WM Local Authority
average universe at 31 March 2003. However, there were some minor differences
for example the Oxfordshire Fund had a higher weighting in UK bonds
(10% v 7%) but a lower weighting in overseas bonds (1% v 4%).
- Annex
1, Table 2 compares the Oxfordshire Pension Fund’s investment
performance for 3, 5 and 10 year periods with the 81 local authority
pension funds measured. The table also compares investment returns with
the retail price index and average earnings.
- Annex
1, Table 3 provides the actuarial assumptions made at the last
valuation at 31 March 2001. When setting his assumptions the Actuary
is basing these on a very long-term time horizon but it is worth noting
that the actual 3-year investment returns (Oxfordshire –11.2% and the
local authority average of –9.1%) fall well short of the Actuary’s longer
term forecasts of 7.25% for equities and 4.9% for Government Bonds.
- 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. It
should be noted that the following County Councils are not included
in the data: -
Bedfordshire
Berkshire
Cheshire
Cornwall
Durham
Essex
Hampshire
Lincolnshire
Nottinghamshire
Shropshire
Worcestershire
- It was the Oxfordshire
Pension Fund’s disappointing investment performance in 2000/01 and 2001/02
that prompted the Pension Fund Committee to carry out an asset liability
study in the spring of 2002 culminating in the major management restructuring
which was completed in 2003.
Financial
and Staff Implications
- Both absolute
and relative investment performance has a significant impact on the
actuarial valuation of the Pension Fund. Any downward trend in future
investment returns is likely to generate an increase in the employer
contribution rates.
Environmental
Implications and Implications for People living in Poverty
- There are none
arising from this report.
RECOMMENDATION
- The Committee
is RECOMMENDED to receive the report.
CHRIS
GRAY
County Treasurer
Background papers: CIPFA Local Authority Pension Fund Investment Statistics
1993-2003.
Contract
officer: Tony Wheeler, Loans & Investments Manager Tel: (01865)
815287
November
2003
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