UK – The head of the 600 million-pound (867 million euro) local authority pension fund of Somerset County Council says only a bad pension fund follows the advice of investment consultants to the letter.
“I think it’s the sign of a poor pension fund if it has to follow a consultant’s advice slavishly. If you’ve got the time, which you should have, you shouldn’t need a consultant for asset allocation or manager selection,” said Chris Bilsland, corporate director, treasury, at Somerset.
“A good pension fund is one which doesn’t take consultants’ advice,” says Bilsland. He says he has a “healthy scepticism” about consultants, as they are risk averse.
“The Somerset style is, yes, we talk to consultants, but we make our own decisions,” Bilsland said. The members’ input is vital, he says. You can’t ignore advice, he says, but you don’t have to follow it.
And he is wary of fund managers. “Fund managers’ first interest is their own business. I understand that. It’s important to have good people to manage the managers.”
The fund has returned 12% a year for the last 20 years and Bilsland said he would be surprised if 2003 was not as good. “This year’s been another good year for the Somerset Pension Fund.”
Bilsland floated the idea of greater cooperation among local authority pension funds. He said it might be possible for, say, Somerset to work with its neighbouring counties on risk management.
In terms of asset allocation, Bilsland is still a keen fan of equities. “I still believe equities are the right asset class for a local authority pension fund to be in.” And he sees the fund eventually putting five to 10 percent of its assets into property and that it is currently searching for a property manager.
Speaking at a conference in London organised by IIR, Bilsland added it was a “shame” that the fund is not invested in private equity or hedge funds, as the scheme members were not persuaded of their value.