07 September 2007
Funds in the Local Government Pension Scheme have 'dramatically reversed' their misfortunes of 2000/03 by turning an average annual loss of 9.1% into a return of 14.3% for 2004/07, a report by CIPFA finds.
Local authority pension fund investment statistics shows that, with an average five-year return of 8.2% between 2002 and 2007, LGPS funds are now making similar levels of return to private sector pension schemes.
The report also shows how the funds have quite radically adjusted their asset mix over the past decade, with investment in the UK property market doubling from a 4% share of total assets to an 8% share and a doubling in UK bonds from 5% to 10%.
The report said this shift away from equities and towards bonds indicated funds' desire to 'reduce the volatility of performance associated with a high level of equity investment'.
However, at 70% of total assets, LGPS funds still invest more heavily in equity markets than private sector schemes, which on average hold 58% of their assets in equity markets and invest more in bonds and index-linked assets.
The average gross return on investments for local authorities over the ten years from 1997 was 7.7%. The lowest return was at the Hammersmith & Fulham fund (5.7%). The highest was at the Shetland Islands fund (8.9%).
PFsep2007
