UK - Provisional figures suggest the Somerset County Council pension fund made a loss of 28% in the 2008-09 financial year, as the value of the fund dropped to a low of £765m (€878.6m) by the end of March.

An update on the performance of the pension fund, presented to the full council last week, revealed over the last two years the value of the pension fund - which has over 19,000 active members, 9,000 pensioners and 10,000 deferred members - declined from a peak of £1.1bn in 2007 to £765m at the end of the first quarter of 2009.

The pension fund's current investment strategy is 25% in UK equities, 42% in overseas equities, 19% in fixed income, 10% in property, 1% in cash and 3% in private equity, and the report stated this "diversified portfolio of assets" is designed to help counteract volatility.

Despite the diversification the report admitted the performance over the last year "has been very poor in absolute terms with provisional figures indicating the scheme made an investment loss of 28% for the 2008-09 financial year".

In addition, Somerset council were given the latest updated actuarial statement on the funding level of the fund, which had dropped from 95% at the last triennial valuation in March 2007 to just 63% at 31 December 2008.

However, the report warned the updated statement "should be seen as an indication of the direction of travel as the next full valuation approaches as at 31 March 2010 rather than a fully accurate assessment".

Full details of the pension fund's annual investment performance will be included in its annual report and financial statements in September, although the council is in the meantime seeking an active Japanese equity manager to run a £22.5m portfolio. (See earlier IPE article: Rhondda and Somerset start manager searches)

Elsewhere, Warwickshire County Council has appointed Hymans Robertson as investment consultants to its £850m pension fund.

The role will involve the provision of investment advice in a variety of areas including fund strategy and manager selection, as in the first quarter of 2009 the fund returned -7.12% with an asset allocation of the fund at the end of March 2009 was 62.7% in equities, 26.5% in fixed income, 5.6% in hedge funds, 4.3% in property and 0.9% in cash. 

Phil Triggs, group manager of treasury and pensions at Warwickshire, said: "We have made a good deal of progress in relation to the investments of the fund over recent years and wanted to work with an investment consultant who could help us tackle the future with a clear and comprehensive plan combining innovation with the more traditional skills. The firm's deep understanding of local government pension schemes and also liabilities was a clear differentiator for us."

And West Sussex County Council has initiated a search for a global custodian for its £1.23bn pension fund as part of a "regular programme of procurement services".

State Street currently holds the position but West Sussex is now tendering for the supply of custodian services for £1.029bn of securities held by the pension fund in two balanced mandates, one equity and one bonds.

The pension fund, which has 21,600 active members, 12,300 pensioners and 13,200 deferred member, currently employs UBS and Baillie Gifford to run two active, balanced mandates on a discretionary basis, while Cushman & Wakefield runs a direct and indirect property portfolio and Pantheon Ventures and Partners Group manages the private equity portfolio.

The custodian contract is expected to last for an initial period of four years with the option of a further three-year extension, and applications should be submitted by 22 June 2009 with further information available from the council's procurement department.

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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