UK - The States of Guernsey has revealed the Superannuation Fund for public sector employees has declined in value by £142m (€175m) in 2008.

Figures from the Treasury and Resources Department in Guernsey, the second-largest of the Channel Islands, revealed the Superannuation Fund was valued at £896.4m at its last actuarial valuation on 31 December 2007.

A quarterly update showed the value of the pension fund had deteriorated in the first half of the year to £826m in March and £818m at the end of June, as the structure of the fund's portfolio is 73% invested in equities, 21% in bonds and 6% in cash.

However, in the publication of the actuarial report ahead of the States of Guernsey Budget later this month, the Treasury and Resources department confirmed at 30 September 2008 the fund had dropped from almost £900m - and a 90% funding level - in December 2007 to just £754m.

The Guernsey government admitted the figure is a "significant decrease from the balance at the beginning of the year", but said "it should be remembered that world financial markets have been in a state of turmoil" and confirmed "the Department and its professional advisers continue to monitor the situation closely".

Following the actuarial valuation and the continued losses to the fund, particularly in the first half of 2008, the Treasury and Resources Department has commissioned an "in-depth review of the investment strategy for the Superannuation Fund". 

The department "periodically reviews the allocation of the assets", and in 2007 it agreed to an "interim measure" to diversify approximately 10% of the fund into property, so has now appointed two property managers to advise on when to make the first investments.

That said, the review currently under way will "consider the levels of risk which are appropriate to the Fund's investments before modelling the assets and liabilities to produce the best asset allocation baseline".

Once this work is complete, the Department said it would consider any changes required to its specialist investment managers to ensure the States get the "best possible returns for an acceptable level of risk".
 
Meanwhile, the States of Jersey Public Employees Contributory Retirement Scheme (PECRS) recently appointed two new investment managers to run unconstrained global equity mandates.

The PECRS Committee of Management appointed Baillie Gifford and AXA Framlington to run portfolios valued at £80m and £55mm, respectively, with the mandates funded from an existing equity portfolio managed by Legal and General.
 
However the committee confirmed the appointments would not result in a change to the "previously approved investment strategy of investing one third of the schemes assets in risk reducing investments (cash based investments, bonds and gilts) and two thirds of the assets in return seeking investments (equities and property)".

Although the PECRS is a defined benefit (DB) scheme the government is not responsible for meeting any ongoing deficiency in the scheme, and latest figures showed the assets of the fund at 31 December 2007 totalled £1.1bn, with a deficit of just £146m.

The States of Jersey and Guernsey are crown dependencies of the UK.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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