HYMANS ROBERTSON REVIEW OF FUND PERFORMANCE FOR THE QUARTER ENDING DECEMBER 2016
To consider the report submitted by Hymans Robertson.
Minutes:
The Committee received an overview and update from Hymans Robertson on the Pension Funds’ performance in the quarter ending 31 December 2016.
The Committee was informed of the factors affecting fund performance during the quarter, and other material issues.
Market Summary
The Global Equity markets saw growth over the quarter, after a subdued start, boosted by accommodative monetary policies. Both UK Gilt and US Treasury bond yields rose over the quarter leading to falls in government bond prices. However, Global credit markets outperformed government bonds as credit spreads narrowed. Overall it was a relatively strong quarter for the commercial property market, as capital values rose.
Fund Performance
The total value of the fund increased by c. £8m to £648.3m as at 31 December 2016. The total return on the Fund’s assets over the quarter was 1.4%, slightly behind the asset benchmark return. Relative to the strategic benchmark, the Fund outperformed over the last quarter.
It was noted that the Fund’s equity mandates delivered positive returns over the quarter, although the Baillie Gifford Global Equity fund underperformed the broader market.
The Ruffer’s Absolute Return fund and Baillie Gifford’s DGF outperformed their benchmarks over the quarter, whilst the GMO Real Return fund underperformed.
The RLAM bond mandate delivered negative returns in absolute terms, but outperformed the broader market.
Investment manager changes
The majority of the Fund’s remaining direct holdings in the Ruffer Absolute Return portfolio transferred into the London CIV during quarter 3, 2016, however, a small direct holding of c.£12k remained. It was expected to be transferred to the London CIV in due course. In addition, the report outlined that the Ruffer Absolute Return strategy, both Baillie Gifford strategies were accessed via the London CIV.
An improvement in the fund’s manager’s rating for the GMO Real Return fund following positive meetings with their investment team. It was noted that Hymans Robertson rated the fund a “Retain”. The fund was previously downgraded to “On Watch” in May 2016 but Hymans Robertson continue to engage with and monitor the manager closely.
Asset Allocation
The Fund’s strategic asset allocation was amended following the quarter end to reflect a reduction in the allocation to multi-asset mandates and an increase in equity allocation although, on a look through basis, the overall allocation to equities remained broadly unchanged at c44%
The Committee has agreed to rebalance from bonds and cash in favour of property and Multi-Asset funds, with the associated transactions due to be completed in Q1 2017.