Issue - meetings
WM Annual Review of the Pension Fund Performance 2014/15
Meeting: 23/07/2015 - Pensions Committee (Item 5)
WM Annual Review of the Pension Fund Performance 2014/15
To receive a presentation from WM Performance Services.
Minutes:
Ms Coventry of WM Company made her annual presentation which provided the Committee with a summary of the performance of pension funds measured by WM. The key messages conveyed related to:
a. performance of Funds in the context of the financial environment in the period.
o Average returns were 32% and indicated strong performance
o Equities (were more volatile but) had performed better than bonds (whose yields were at historic lows)
o Alternatives had performed below equities
o Recommended that, because of their nature, investments in property should be for strategic reasons
o Current market trends have been to:
§ move from equities to alternatives and
§ move from UK towards overseas investments
§ move from government to corporate investments
b. the performance of Tower Hamlets Pension Fund in the last year,
o Fund asset allocation has been in lice with the average local authority profile
o Fund returned an over benchmark performance of 11.8% in the year
o Over 5yrs the Fund’s relative return is in line with the local authority benchmark
o Some managers have performed above benchmark in the year, Baillie Gifford and Ruffer have added value
o GMO had below benchmark performance in the year but has outperformed benchmark over 3 years
o Alternatives have performed well in the 3 year category
o Underperforming managers over 3 and 5 years are Investec and Schroders
c. performance relative to that of other local authorities’ funds measured by WM in this period
o in 2013 the Fund underperformed other local authorities by 1.2%
o returns were below average in the 3-20 year category
o TH Fund was in the lower median local authority range in relation to absolute risk .v. return. Fund has less volatile stock selection but this produces lower returns
In response to members’ question the Committee was advised that:
· Underperformance was due to stock selection. The fund has more pooled multi asset investments short term, but in longer term investments bonds form the biggest assets
· The fund ranked lower in many of the rankings because of the governance budget; since time was required to proactively supervise investments. However the fund was now at £1Bn and was in a better position to gain exposure alternative types of portfolios. Members were asked to note that the approaching cash-negative position of the Fund would also have an effect.
· Noting that new public sector pensions legislation required that a predetermined/agreed funding level must be present and this might require the Council to adopt a less risk adverse approach, Mr Haines informed the Committee that the Council would be required to determine the balance of risk against contribution rate to ensure that its funding target was met.
REOLVED
That the update be noted.