UK/IRELAND - Powys County Council has appointed Hewitt Associates as the investment adviser for its £280m (€305m) local government pension scheme (LGPS).

The pension fund, which has over 11,000 members and a funding level of 73% at its last actuarial valuation in 2007, initiated a search for a new investment adviser following the withdrawal of Watson Wyatt from the local government market. (See earlier IPE article: Surrey to seek advice as WW leaves LA market)

In the latest 2007/08 annual accounts for the pension fund, Powys stated as a result "no long-term decisions on investments will be taken until our strategy has been reviewed by the new advisers".

The pension fund currently has a target allocation of 45% in equities - 20% in UK and 25% in overseas - 40% in fixed income investments although there is no allocation to overseas bonds, while the remainder is split with 10% in property and 5% in private equity.

Hewitt will now have to deliver the full range of independent advisory services to Powys Council, including asset allocation, corporate governance and fund manager performance monitoring.

"Hewitt clearly demonstrated how we could benefit from their advice and the value they could add,: said Geoff Petty, spokesman for Powys pension fund.

"We feel very confident that their depth of knowledge and breadth of experience will provide our panel with specialist expertise and valuable market insight that will ultimately benefit our members."

Andrew Tunningley, head of investment consulting for Hewitt in the UK, added: "With the current background of market turmoil it is more important than ever for local authorities to receive the best investment advice for their pension schemes. Hewitt has been growing its local authority capabilities in recent years, so we are delighted to be able to use the knowledge we have gained to work in partnership with Powys to meet the funds' long-term objectives."

Hewitt Ireland has meanwhile suggested there may be "some reasons to be optimistic" about equity markets in the latest report from its 'InVision: Group Pooled Pension Survey" for the fourth quarter of 2008. 

Findings from the report showed the average managed fund performance in the three months to 31 December 2008 was -15.5%, and over the year the average return was -34.1%, significantly lower than the -2.5% reported for 2007.

The report also revealed despite an argument sugggesting returns from managed funds have been held back by a bias towards Irish stocks - as the ISEQ dropped -65% in 2008 - the average return from Irish biased equity funds, such as Hibernian and AIBIM, was -20.7%.

In addition, the performance of managed equity funds excluding Ireland, such as Hibernian International Equity and New Ireland International Equity, fared less well with an average return of -21.5%.

However, Hewitt Ireland claimed, "despite a significant amount of gloom and doom, there may in fact be a few signs appearing that the worst may be behind us, at least with regard to equity market performance".

Authors argue stock markets globally are "heavily oversold and are showing some signs that they may have bottomed", while interest rates are falling and money supply rates are soaring as governments pump money into the economy - a move which the consulting firm said "should combat the deflationary forces at work over the next 12 months, though should prove to be highly inflationary in the longer-term".

The report stated: "We may be jumping the gun a little, but we think there are grounds for cautious optimism as we enter 2009, as long as the major equity market indices don't break to new lows in the months ahead.

"However, any recovery will likely take tome to develop, due to the powerful deflationary forces at work. Private sector de-leveraging is being offset by significant increases in public debt and government spending. The economic recovery will depend in large part on the extent to which governments around the world are successful in this endeavour," it added.

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