The Greater Manchester Pension Fund (GMPF), England’s largest local government pension scheme (LGPS), underperformed other local authorities in the year to the end of March with an 11.7% return on investments.

Even though the return is markedly higher than the pension fund’s 7% return posted the year before, it is lower than the average UK local authority pension fund return of 13.2%.

Total assets held by the GMPF rose to £17.6bn (€23.9bn) at the end of March 2015, up from £13.3bn 12 months earlier.

In the fund’s annual report, Kieran Quinn, chair of the pension fund management panel, described the relative performance as disappointing but said: “The GMPF has strengthened its investment management arrangements this year with the aims of improving performance and broadening the options for the future.”

As part of these plans, it appointed LaSalle as its property manager, which took over from the in-house team, and handed Investec a global equity mandate.

“The appointment of a debt manager in the next financial year will complete our revised arrangements,” Quinn said.

The pension fund said it had positive returns in all investment categories, describing them as “substantial” for all categories except UK equities and cash.

It increased its benchmark weighting to overseas equity during the year to 65% of the total equity weighting from 60%, following a decision in 2014, according to the annual report.

At the end of the year, it implemented a 5% target allocation to private equity and a 4% allocation to infrastructure, with new commitments to specialised private equity funds set at £200m a year and to specialised infrastructure funds at an average of £95m a year.

The pension fund also set a target allocation to its Special Opportunities Portfolio of 5%.

These targets compare to current realistic benchmark allocations of 2.5%, 1% and 1.5%, respectively. 

Even though the latest annual return was disappointing compared with other pension funds, Quinn insisted the GMPF had an excellent long-term track record, which underpinned the funding level.

On a like-for-like basis, the GMPF was the third best funded LGPS of the 89 funds in England and Wales at the actuarial valuation in 2013, he said.

Quinn said investment returns were having an ever-greater impact on contributions as the GMPF matured.

A 1% investment return now equates with 8% of a contributing employer’s payroll, and this ratio is expected to rise in the future, he said.

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