UK - Merseyside Pension Fund has confirmed the value of its assets fell to £4.26bn (€5.47bn) prior to the recent market turbulence, following an overall investment return of -1.3% for the year to March 2008.

Figures from the pension fund's annual report for 2007/08 showed the scheme underperformed its benchmark return of -0.7%, although officials the fund performed better than the average return of -2.8% for all local authority pension funds.

The pension fund suggested it had been impacted by the volatility of the financial markets over the 12 months to March 2008, as the "implications and extent of the "credit crunch" and slower economic growth became more apparent".

Merseyside officials claimed actively-managed UK and overseas equity mandates - which account for 59% of the assets - were the most significant contributor to the underperformance  as UK equities saw a negative return of -9.6% against a target benchmark of -7.7%, while European (ex. UK) mandates achieved 1.3% compared with the benchmark of 2.8%.

In addition, it claimed the performance of its Japanese equities was also "disappointing" and generated a negative return of -18.2%, although it highlighted the outperformance by Pacific Basin (ex. Japan) equities fared well, returning 11.9% - well above the benchmark return of 9%.

Fixed income investments, which account for around 20% of the overall portfolio, "performed broadly in line with their respective benchmarks", although Merseyside admitted the 10% allocation to property achieved -11.5%, below the benchmark return of -10.7%.

That said, the report highlighted cash and other alternative investments - including hedge funds - had limited the negative impact on the fund, with a return of 7% against a benchmark of 5.8%.

Figures confirmed the overall value of the fund, which has around 115,000 members in total, fell from £4.3bn in March 2007, to £4.26bn in 2008, although it claimed its 10-year return of 5.9% "remains comfortably ahead of both average earnings (4.1%) and inflation (RPI 2.1%)".

The annual report also confirmed the pension fund is in the process of selecting new active UK equity managers to run a mandate, following its decision to terminate the existing contract with Barclays Global Investors (BGI) in November 2007, with the aim of appointing the new managers by the end of the year. (See earlier IPE article: Merseyside seeks UK 130/30 managers)

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