UK - Northumberland County Council pension fund lost almost £41m (€52m) from the value of its assets in the first three months of 2008.

Figures shown in reports to be discussed at the next Pension Fund Panel committee meeting on June 13 2008 revealed the value of the fund, part of the Local Government Pension Scheme (LGPS), had dropped from £699.1m at the end of December 2007 to £658.2m at March 31 2008.

The report showed the drop in value might have resulted from significant underperformance from investments in active corporate bonds and global equities, although the scheme's allocation to property had also underperformed the benchmarks during that period.

The Pension Fund Panel will be told the value of its assets, excluding property and private equity, fell from £627.9m to £586.5m in three months, as bond investments fell by almost £19m, UK equities dropped by almost £6m and global equities slipped from £232m to £214.8m.

Findings from the appendix report showed ECM was one of the worst underperformers in the first quarter, as its active portfolio of corporate bonds returned -8.2% in the three months to March 31 2008, compared to the benchmark of -2.7%.

This follows a poor performance in the previous quarter when it returned 0.8% compared to a benchmark of 2.4%, although the active global equity portfolio managed by Alliance Bernstein, following its appointment in November 2007, also achieved poor returns of -9.2% in contrast to the benchmark of -6.9%. (See earlier IPE article: Northumberland taps two for global equity)

In addition, the fund's allocation to property, through two portfolio managed by Schroders and Blackrock, also underperformed during the first quarter, with returns of -4.5% and -4.1% respectively against benchmark returns of -3.8%.

The figures follow Northumberland's decision at the last committee meeting to delay its triennial asset liability modelling (ALM) study and the review of its investment adviser, Watson Wyatt, until after the May elections, potentially postponing any decisions about the long-term asset allocation of the fund until the autumn. (See earlier IPE story: Northumberland delays ALM and adviser reviews)

At the moment, Northumberland County Council pension fund has a target asset allocation of 30% in UK equities, 30% in overseas equities, 25% in bonds, 10% in property and 5% in private equity, although this was last reviewed in January 2005.

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