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THE FUND |
The Fund
The Regulations require the Committee to maintain a fund to
provide for the payment of current and prospective benefits to members of the
scheme. In order to ensure that this objective is achieved, the Committee must determine
a suitable investment strategy, which provides both a high return on
investments and an acceptable level of risk.
All income received by the Committee, including employees’ and
employers’ contributions, rents, interest and dividends are paid into the Fund.
Expenditure, such as monthly pensions, retirement allowances, death grants,
refunds and the administration costs of the Committee are met from the Fund.
The assets and liabilities of the Fund are valued every three
years by the Scheme actuary. Following each valuation, the actuary certifies
the employers’ contribution rates to maintain the viability of the Fund.
Fund
Management
The Committee retains overall responsibility for the Fund, with
power to appoint one or more fund mangers to manage and invest fund monies on
its behalf. In appointing fund managers, the Committee retains statutory
responsibility for the management of the Fund and that responsibility cannot be
delegated.
The Committee has a statutory duty:-
·
To take account of the amount to be
managed by each manager and be satisfied, having taken advice, that it is not
excessive.
·
To have regard to the suitability of
investments.
·
To monitor the performance of the
managers and from time to time review their appointment.
·
To take proper advice, obtained at
regular intervals.
The Committee maintains overall control of the Fund by:
·
Agreeing the overall investment
objectives with the fund managers taking into account actuarial expectations
and investments powers.
·
Setting targets for asset allocation.
·
Monitoring investment performance.
·
Monitoring investment transactions.
The Committee has compiled a Statement of Investment Principles
(SIP) as required by the Local Government Pension Scheme (Management and Investment
of Funds) Regulations (Northern Ireland) 2000.
Copies of the SIP are available on request or can be downloaded from the
NILGOSC website at WWW.nilgosc.org.uk.
During 2006/07, the Committee continued with its specialist
structure of one UK equity manager, two global equity managers, one bond
manager and one passive manager. The
allocation of the fund between asset classes is determined by the Committee at
its annual strategy meeting, normally held in June each year. The Committee’s passive manager is
responsible for maintaining the asset allocation within the agreed ranges.
As 31 March 2007, the Committee had the following fund managers in
place to manage its equity and fixed interest portfolio:
UK Equities Baillie
Gifford
Global Equities Wellington
Management
AllianceBernstein
Bonds Aberdeen
Asset Management
Passive Fund Legal
& General
Property LaSalle
Investment Management
In October 2005, the Committee terminated its mandate with Bank of
Ireland following a continuous period of underperformance. Funds were transferred to Legal and General
on a temporary basis while the Committee began its search for a replacement
manager. The Committee appointed its
new global equity manager AllianceBernstein in March 2006, with the asset
transfer taking place in June 2006.
Investment Objectives
The
majority of the Fund’s liabilities are linked to inflation and salary growth.
The overall objective of the Committee is therefore to invest the majority of
the assets in investments which are expected to exceed price inflation and
general salary growth over long periods.
Each
element of the Fund portfolio has its own specific performance measure however
as an overall target the Committee expects the fund return over a 5 year
rolling period to outperform the rate of increase in the Retail Price Index
(RPI) by 5%. The Committee monitors the investment
performance of its investment managers by availing of JP Morgan’s performance
measurement and reporting facility.
Each manager is remunerated on a fee basis, dependent on the market
value of the portfolio.
The managers have each been given a performance target and asset
allocation ranges compiled by the Committee, using indices applicable to the
asset type and geographic market.
|
Asset
Class |
Portfolio % |
Benchmark Indices |
UK Equities Specialist
|
19.9 |
FTSE All Share Index
+ 2% |
Global Equities Specialists
|
22.9 |
FTSE All World
Developed Index + 2% |
|
Bond
Specialist |
8.0 |
|
|
|
3.0 |
FTSE All Stocks Gilts + 0.75% |
|
|
5.0 |
FTSE Over 5 Year Index Linked Gilts + 0.75% |
Global Passive
|
38.8 |
|
|
|
10.1 |
FTSE All Share Index |
|
|
3.8 |
FTSE All World North
America Index |
|
|
7.3 |
FTSE All World Developed
Europe ex UK |
|
|
4.5 |
FTSE All World Japan |
|
|
3.0 |
FTSE All World Developed Asia Pacific ex Japan |
|
|
2.1 |
S&P/IFC Investable Composite |
|
|
2.5 |
FTSE All Stocks Gilts |
|
|
5.5 |
FTSE Over 5 Year
Index Linked Gilts |
Property
|
10.4 |
IPD Long Term Funds £50-250m Index + 1% |
The standard target and benchmark for each asset class of the fund
as at 31 March 2007 is as above.
Market
Report
The FTSE All Share produced a good performance over the year, returning 11.1%. The FTSE World ex-UK overseas equity index
returned only 2.6% in the twelve month period.
Continental European equities produced a return of 12.4% whereas US and
Japanese produced negative returns of –1.0% and –9.9% respectively.
Property again produced strong returns, with the IPD index returning
15.6%
The graph below shows the investment return in each asset category for
the twelve months to 31 March 2007.
Fund
Value
The value
of the Fund at the 31 March 2007 was £3,171m (2005/06 £2,971m), an increase of
£200m (6.7%) on the previous year.
Market
values can fluctuate widely over short periods of time, reflecting short-term
changes in investment conditions. In contrast, the triennial valuation of the
fund is concerned with the long-term and uses actuarial assumptions.
