Agenda item

Report RES13088

Summary details were provided of the investment performance of Bromley’s Pension Fund for the financial year 2012/13 along with information on general financial and membership trends of the Fund and summarised information on early retirements. The Fund’s external advisers, AllenbridgeEpic provided further detail on investment performance and Fidelity and Baillie Gifford each provided an update report on performance and economic outlook/prospects.

The market value of the Fund rose during the March quarter to £583.9m compared to £499.5m at 31st March 2012. By 24th April 2013, the Fund value had risen to £585.9m.

Until 2006, the target for Fund managers was to outperform the local authority universe average by 0.5% over rolling three year periods. Following a review of management arrangements in 2006, both managers were set performance targets relative to their strategic benchmarks; Baillie Gifford’s target to outperform the benchmark by 1.0% - 1.5% over three-year periods and Fidelity’s to outperform by 1.9% over three-year periods. Although the 2012 strategy review saw maintenance of an 80%/20% split between growth seeking assets and protection assets, the growth element would comprise a 10% investment in Diversified Growth Funds (DGF) and 70% in global equities, the latter removing arbitrary regional weightings in favour of flexibility in world stock markets and potentially improved long-term returns.

Baillie Gifford and Standard Life each received £25m on 6th December 2012 from Fidelity’s equity holdings to establish the 10% DGF allocation (Phase 1 of the new strategy). For this, Baillie Gifford achieved a 5.0% return In the March quarter against a benchmark of 3.5% above base rate and Standard Life achieved a 3.7% return against a benchmark of 5% above the six month Libor rate.

On performance generally, Baillie Gifford returned 11.9% in the March quarter (2.2% above the benchmark) and Fidelity returned 11.5% (1.9% above benchmark). The Fund’s medium and long-term returns also remained strong and long-term rankings to 31^st December 2012 were good. Baillie Gifford’s returns for three years and ten years ended 31st March 2013 (10.0% and 11.5% respectively) compared favourably with those of Fidelity. Over five years, both made an annualised return of 9.7%.

Details were also provided of the provisional outturn for the 2012/13 Pension Fund Revenue Account along with fund membership numbers. A provisional net surplus of £7.5m was achieved (due to investment income of £10.2m).

Expanding on his performance report, Mr Alick Stevenson provided further commentary on global economic conditions and highlighted key points on the Fund’s performance. Overall he felt it was a good quarter.

With reference to L B Bromley’s £13m investment in Baillie Gifford’s Active Gilts Plus Fund, Councillor Russell Mellor enquired of the background to the BG Fund being ranked 547 from 647. Mr Stevenson thought the investment performance provided a solid return over the previous 12 months. The fund returned 6.5% against an index of 5.3% and Mr Stevenson indicated that the index was the FTSE Active Gilt Index. Mr Ken Barker of Baillie Gifford indicated that the index comprised a return on all gilts and the fund had performed well against that index, 647 providing the highest yields.   

RESOLVED that the report be noted.