UK - The value of the BBC Pension scheme dropped £1.6bn (€1.86bn) to £6.5bn at the end of March 2009.

Figures from the pension scheme's annual report for 2008-09 showed the pension fund had an investment return of -18.6% over the year, 5.1% behind the strategic benchmark return of -13.5%.

The overall value of the scheme dropped from £8.1bn in March 2008 to £6.6bn a year later, although the report said since the end of March "equity markets have continued to recover from the lows seen earlier in the year".

In the report, trustees of the BBC pension scheme admitted the tactical investment positions taken by the fund had reduced performance by 2.5%, while manager underperformance was 2.6%, resulting in the value of the schemes investments dropping £1.677bn over the year.

Even over five years, the report revealed, the annualized performance of the scheme was 4.1% against a strategic benchmark of 5%, as tactical positions had detracted 0.3% and investment managers underperformed by 0.6% over the period.
However, the trustees noted that while its investment committee closely monitors manager performance and the tactical positions taken against the benchmark, it is "looking for long-term returns rather than trying to take very short-term market positions".

It added: "Even though our managers have underperformed over the last five years the very long term numbers remain positive and the trustees continue to believe that it is possible to add value through active management."

That said, the latest interim valuation of the fund for 1 April 2008, showed the pension scheme's funding level declined since its last triennial valuation in 2007, and the fund had moved from surplus to deficit.

At the formal 2007 valuation, the BBC pension scheme had a surplus of £274.6m and a funding level of 103%, yet a year later it reported a funding level of 95% and a deficit of £469.8m.

In addition, the annual report noted that while "financial conditions affecting UK pension schemes have been very unfavourable" since 2008, it admitted the "deficit will undoubtedly have increased further when the actuary reviews the financial position as at
1 April 2009. The next full valuation will be undertaken as at 1 April 2010". 

The scheme, which had 58,744 members at March 2009, revised its Statement of Investment Principles (SIP) in 2009 to reflect minor changes such as the consolidation of UK and overseas equities into one class of equities.

The new strategic benchmark comprised a 2.5% reduction in equities to 47.5%, with a target bond allocation of 30%, 10% in property and a slightly higher 12.5% investment in alternatives.

However, the current allocation at the end of March included 52% in equities, with the report noting that while exposure to equities "has been reduced marginally over the year the scheme has continued to run a small overweight equity position and this has been painful".

It added: "Managing the assets of a pension scheme is a long term business and the trustees continue to believe that equities will provide good returns over the long term.  The important issue is that the Scheme should not become a forced seller of assets at low prices."

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