UK – The £1.9bn (€2.2bn) local authority pension scheme for Cambridgeshire returned 15.5% according to its annual report, outperforming both its benchmark the average local authority pension fund return by nearly 2 percentage points.
Cambridgeshire Pension Fund said the outperformance occurred on its global equity and bond portfolios, while property and European equity results were below expectations.
However, the fund’s annual report warned: “The strong performance of equities – and credit markets and other risky assets – over the last year or so would seem to be more a reflection of low government bond yields than economic optimism.
“In absolute terms, the future returns from equities are likely to be unexciting,” it said.
Over the year to 31 March 2013, the fund restructured its equity allocation, by reducing the UK equity target allocation to 40% in order to fund infrastructure investments. It also established a new dedicated emerging markets portfolio with managers Skagen Funds.
Partners Group were appointed to run an increased allocation to global infrastructure investments, to further diversify risk within Cambridgeshire’s growth asset allocation. Cash is gradually being committed to projects via funds of funds.
Within its overall 5% target allocation to infrastructure, the fund was also contemplating further local investments. It already has a direct holding in Cambridge and Counties Bank.
Meanwhile, CPF has reduced its target allocation for property to 11%, but is still seeking alternative opportunities within the sector.
Throughout the period, the fund’s average asset mix has been 68.6% in equities, 14.8% in bonds, 7.1% in property and 6.7% in alternatives.
Since the year-end, the fund has sold index-linked UK government bonds in order to increase its investments in the M&G European Loan Fund and the Schroder Strategic Bond Fund. This was done to raise the overall level of yield and provide some protection against a scenario of rising interest rates and falling bond prices.
Meanwhile, the fund – as one of the founder members of the National Local Government Pension Scheme Frameworks – said it hoped the measure would reduce procurement timescales and slash procurement costs by up to 90%.
Cambridge added that later in the year, it and Northamptonshire Pension Fund would investigate using a joint custodian to serve both funds.