Investment returns for the £3bn (€3.6bn) West Sussex Pension Fund were flat over the course of the last year, with the fund citing volatile equity markets and “subdued” bond markets.
According to the local authority pension scheme’s (LGPS) draft annual report, the 0.1% return was below its 0.9% benchmark return, as well as the 0.2% it estimated was the average return achieved across all LGPS.
Examining performance of the fund’s two main managers, West Sussex said UBS Asset Management, responsible for £1bn in assets, had underperformed over two successive years, with a three-year annualised performance of 6.1% compared with a benchmark performance over the same period of 6.6%.
This compared with the £1.4bn managed by Baillie Gifford, which, while underperforming over the course of the 2015-16 financial year, had mostly achieved a strong benchmark outperformance.
The manager returned 9.2%, nearly 2 percentage point above benchmark, over the past three years, and achieved a 1.9-percentage-point outperformance over a 10-year period.
However, it was across its alternative asset portfolio – managed by Aberdeen Asset Management, Pantheon and Partners Group – that the fund saw double-digit returns.
Aberdeen, in charge of the fund’s property holdings, returned 11% over the course of the year but saw the global private equity holdings managed by Pantheon and Partners Group achieve even stronger returns of 14%.
The fund also agreed over the course of 2015-16 to implement a stock-lending programme, loaning an average of £190m in its equity portfolio over the course of the year.
West Sussex’s report said that, after costs of £400,000, its stock-lending programme improved its balance sheet by £1.59m over the course of the year.