7
FYI
fund financials
Update – the economy and your pension
Review of Investment Market Performance,
by Andrew Kirton
the Fund’s Investment Adviser
The last twelve months have been a challenging time.
The Fund year to 31 March 2011 was generally
a good year for markets
which continued to
perform well up to 30 June 2011. The UK economy grew by
1.4% over 2010, although continuing to lag the global recovery,
with concern that public sector cuts announced by the coalition
government could push the economy back into recession
during 2011.
Equity markets performed well over the year with all major
markets rising in both sterling and local currency terms. In the
UK, the FTSE All-Share Index rose 25.6%. In global markets,
the FTSE World Index rose by 22.4% over the year in sterling
terms led by the Europe (ex UK) and Asia Pacific (ex Japan)
markets which returned 29.6% and 27.9% respectively.
Bonds also returned positively with the total return from UK
government bonds being 3.1% as measured by the FTA UK
Gilts All Stocks Index and 8.9% from index linked gilts as
measured by the FTA UK Index Linked Gilts All Stocks Index.
Sterling non-gilts (corporate bonds) also gave a positive total
return of 5.3% as measured by the Bank of America Merrill
Lynch Sterling Non Gilt Index.
The debt crisis caused concern following the Fund’s year
end.
In recent months the global economy has struggled.
Within the European region there were concerns over debt
crises in the peripheral economies of Greece, Italy, Ireland
and Portugal with a number of interventions of support
required over the year. In August, the downgrade of US debt
by Standard and Poor’s and continued Euro debt problems
caused concern in the markets, with falls in global stock
markets combined with rises in the price of UK gilts.
Protecting investments and taking advantage
of opportunities created by current conditions.
The DB Section
What has been important is how the Trustee has responded
to these investment conditions. Over the last twelve months,
the Trustee has continued to implement a number of changes
to the investment strategy of the DB Section. In particular, it is
reducing the reliance on developed market equities. The Fund
is implementing a new strategy, looking to specialist managers
to produce the required returns.
In order to take advantage of the opportunities of such
markets, decisions need to be made quickly. In the current
market turmoil, the Trustee ensured that they remained
informed of the implications for the Fund and were able to
implement changes to the strategy quickly and decisively.
Looking ahead, the Trustee is looking at ways of further
diversifying the portfolio and seeking more reliable sources of
return. Another bond manager will shortly be appointed and
other strategies will be considered.
The DC Section and AVCs
In the last few years a number of changes have also been
implemented to the DC Fund structure and operation, which
should help the Trustee make changes to the funds, taking
advantage of market potential and reducing the impact of
underperformance of markets or managers. More information
on these changes can be found on page 9.
DB investment managers
State Street Global Advisors
Legal and General Assurance (Pensions Management)
Limited
BlackRock Investment Management (UK) Limited
Zurich Assurance Limited
Odey Asset Management LLP
Oldfield Partners LLP
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New managers over the course of the year include:
Partners Group
– investing in private equity
Cube Infrastructure Fund, managed by Natixis
Environnement & Infrastructures Luxembourg SA
–
investing in infrastructure
Insight Investment Management (Global) Limited
–
investing in credit
Longview Partners LLP
– investing in global equities
Havenport Asset Management Pte Ltd
– investing in
Asia Pacific equities
Franklin Templeton
– investing in global bonds
Bluecrest
– investing in global bonds
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