UK - The Merseyside Pension Fund posted an annual return of -17.7% for the year 2008-09, equivalent to a decline of £800m (€938m).
A summary of the fund's investment performance, scheduled to be presented at the next pension committee meeting of Wirral Council, revealed the result was just ahead of its bespoke benchmark which fell 17.8%, and was also higher than the average local authority pension fund return of -19.2%.
Wirral Council attributed the poor performance to "an unprecedented downward spiral across the globe, encompassing all asset classes", as the "near failure and rescue of high-profile financial institutions worldwide exacerbated a credit crunch which spilled over into the real economy".
However, the report from the director of finance, based on analysis by the WM Company, suggested the relative performance of the fund had "held up well" against its benchmarks, with the exception of its alternative assets portfolio which produced an "extremely disappointing performance".
It noted the asset class "underperformed its benchmark by 18% and exerted a materially negative impact on aggregate fund performance of 1.7%".
The document noted the return of -17.7% meant that the fund had declined in value by around £800m over the year to March 2009, from a total value of £4.3bn a year earlier. (See earlier IPE article: Merseyside reports negative returns)
However, Merseyside Pension Fund (MPF) said the overall value of the scheme would not affect pension entitlements in any way and pointed out that "in 2008 the fund met its benchmarks despite very difficult market conditions".
It also pointed out that a strong positive cashflow had stopped the scheme from becoming a forced seller of equities over the year so the majority of the £800m loss had not been "realised".
Recent stock market rallies since the end of March mean almost half of the notional loss may have been recovered, as the markets "contributed to a significant improvement in the fund's net asset value".
The MPF pointed out that changes to international markets mean the value of the pension fund "fluctuates regularly", but emphasised that it has "stringent risk controls in place to ensure that investments are not limited to any one type of asset or market".
It argued that local authority schemes are long-term investors and are "accustomed to managing short-term fluctuations in the stock market", however it admitted "the current global downturn presents particular challenges to both private and public sector pension funds because, no matter how diverse their investments are, all assets are feeling the effects".
A statement from the fund added: "The stewardship of £3.7bn of assets is not something that we take lightly and we expect the value of the fund to recover over time as the economic climate improves."
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