Lancs and Newham top State Street performance league table
0Lancashire County Pension Fund has been rated the best performing fund in the Local Government Pension Scheme for 2015/16.
Investment firm State Street has put the fund at the top of its local authority annual league tables, which evaluate performance across a broad range of asset classes for 100 LGPS closed and active funds.
Both Lancashire, which achieved a 4.5% return on its investments, and second-placed Newham Pension Fund (3.5%), attributed a globally diverse portfolio of investments, in part, for their performance.
Mike Jensen, co-chief investment officer for the Local Pensions Partnership, which is responsible for the Lancashire Pension Fund, told Room151: “About six years ago we successfully recommended a new strategy to our trustees that was less risky than the LGPS average, but wouldn’t give up a commensurate return.
Mike Jensen, Local Pensions Partnership
“We de-risked by reducing our exposure to listed equity from about 75% down to about 40%. Our equity exposure is global, which drove the performance.
“We took the view that Sterling was likely to weaken and that interest rates and inflation in the UK would remain low.
“It is very pleasing that we have been in the upper quartile during the up years and near the top of the list during the down years.”
Stephen Wild, corporate finance manager at London Borough of Newham, said: “If you look at our overseas equities as a whole we are overweight compared to the median. We are underweight on UK equities. Half of those overseas are managed by active and half passive.”
Lancashire was ranked top of the table within the index-linked bonds category, with a return of 8.2%.
Jensen said: “”We have taken a strategy that is based on the view that the ultra-long part of the gilt curve represents the best value – we own the longest duration bonds – 48, 49 and 53 years.
“In general other (LGPS) funds have external, rather than internal, mandates and in the world of ultra-low interest rates, the management fees take a significant part of the returns.
“Also, their assumption is that they need to be around the 30-year benchmark on inflation linked mandates.”
Although Lancashire performed the worst of all funds in the property category with a return of just 5%, Jensen attributed this to the timing of investments in this field.
He said: “The cited figures give a false picture because we spent a lot – around £100m in the final month of the year. Next year we should see a decent catch up in those returns.”
Newham came top within alternative investments with a return of 35.2%.
Wild said: “We haven’t got a huge sum in alternatives but what we did have, we had a phenomenal return of 35%. That was to do with exceptional performance in our infrastructure project fund.”
He also put the performance down to training for members, which he said meant they are “confident enough to make tactical changes and challenge our advisers.”
Overall, only 36 of the funds made a return of above 0% across their investment portfolio, with the remainder on zero or below.
London Borough of Brent finished bottom of the table with a loss of -4.6% across its portfolio.
