UK - The Cumbria Pension Fund has suffered from long-term underperformance, an audit commission best value inspection has revealed. In a report published this month inspectors noted that average performance in the 10 years from 1991 to 2000 was in the bottom 5% of local authority pension funds.
The £750m fund achieved a “no star” rating from the commission and came 99th out of the 100 funds over that period.
According to the review, the scheme is now improving after moving from a balanced strategy to a core-satellite approach – coming fourth among local authorities in the year 2000/2001.
Cumbria County Council’s deputy director of finance and central services Alan Madin said: “As a consequence of performance [issues] we concluded that we should move to a core-satellite approach.”
Previously the fund had a structure of two balanced managers – Schroder Investment Management along with Phillips & Drew supported by a small fixed interest and property portfolio.
Cumbria reorganised its portfolio by ditching Phillips & Drew, downgrading Schroders to a £240m UK equities brief shared equally with new manger Capital International and also appointing Legal & General Investment Management for a £250m passive mandate, Putnam Investments for a £100m global equity portfolio and Rothschild Asset Management for a £80m global bond brief.
Madin noted: “By moving to this structure our performance would be less impacted by any individual manager.”
Cumbria said it was also considering allocating a part its fund into alternative investments, in particular venture capital, in a bid to maintain its current healthy performance.
The audit commission has recommended setting top quartile performance for the local authority scheme but has accepted that the schemes’ goal of top 50% performance represents a real challenge.
The Cumbria pension fund was advised on changes to its scheme by Hymans Robertson.
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