UK - Strathclyde Pension Fund is moving forward with changes to its investment strategy, with the appointment of two absolute return bond managers and a tender search for a transition manager, as its deficit hits £2.6bn (€3.04bn).
Figures presented at the latest meeting of the pension fund committee showed the first quarter return was -8.1%, 0.2 percentage points higher than the benchmark, however the value of the fund still dropped from £8.13bn in December 2008 to £7.48bn (€8.77bn) in March 2009.
An inter-valuation report revealed the fall in value had impacted the funding level of the scheme, as the deficit had increased from £486m at the last triennial valuation in March 2008 to £2.6bn a year later, with the funding level moving from 95.1% to 74.5%.
The committee acknowledged that the "estimated funding position had been affected by a squeeze from both sides as falling gilt yields had increased the valuation placed on liabilities whilst falling equity markets had depressed the value of assets", but confirmed the full review of the funding position and contribution rates would wait until the next valuation in 2011.
A summary of the fund's investment performance over the 12 months to March 2009 showed a total annual return of -20.8%, against a scheme-specific benchmark of -21%, as "2008 proved to be one of the most difficult and extraordinary periods in financial markets for a generation".
However, a "snapshot" of the scheme at 30 April 2009 showed improving equity markets had helped the fund recover slightly to a total asset value of £7.92bn, although this is significantly lower than the £9.98bn fund value recorded in March 2008.
Meanwhile, minutes from a special committee meeting held on 8 June 2009 showed the pension fund had appointed two new investment managers following underperformance by Henderson and Western Asset. (See earlier IPE articles: Glasgow begins bonds search and Strathclyde targets absolute return bonds)
The tender notice was issued in December and the final shortlist of five managers - Threadneedle, Henderson, GSAM, PIMCO and Western - were interviewed by the committee who then decided to appoint "Threadneedle and PIMCO taking into account the advice of Hymans Robertson and the Investment Advisory Panel (IAP)".
In addition, the committee agreed to a recommendation by the IAP in May, to start a tender process for transition management services, as these had been taken over by Nomura after the Japanese bank bought the business of Lehman Brothers, Strathclyde's former transition manager.
Following the takeover the scheme had investigated the "operation and contractual issues raised by potential transfer of the fund's transition management contract", and while the transfer to Nomura was acceptable from an operation perspective the IAP noted advice from GCC Legal Services had led it to conclude it would be "appropriate" to tender the contract "as soon as was practicable".
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