Councillors are to meet face-to-face the various managers of the SIC’s pension fund, which has taken a severe hit in the wake of the global financial crisis, on Wednesday.
Barclays Global Investors (BGI), which is charged with investing 92 per cent of the £147 million pension fund in equity and bonds, Schroders, which invests 6 per cent of the fund in property and Record, which is responsible for investing the remaining 2 per cent in the currency markets, will be asked to explain their respective performances to councillors.
A representative of performance analysts WM Company will also deliver a verdict on the three managers. The overall value of the pension fund fell by £40 million in 2008/9, mainly as a result of the credit crisis which has affected economies all over the world, and it is now worth only two thirds of its peak value of £225 million, achieved back in 2007.
Last October, members agreed to ditch Capital International’s mandate to invest the bulk of the pension fund in favour of Barclays after head of finance Graham Johnston said it should “immediately offer better performance”. Over the past year the equity and bonds portfolio has fallen from £174 million to £136 million but Barclays has only been managing the fund for three months of that period.
Mr Johnston stated in his report for councillors: “It has been a very difficult and busy year for the pension fund, which is reflected in its value. BGI have managed the fund for only three months and have, as expected, produced a return very close to the markets they are investing in.”
The report is highly approving of the performance of Schroders, whose investments have slipped from £10 million to £9 million, describing their cautious approach as having “produced a great start” to their mandate during “a very difficult investment period”. But it also expresses “extreme dissatisfaction” with Record, whose currency market manoeuvrings have seen their portfolio slide from £3 million to £2 million.
Meanwhile, in a letter to Mr Johnston and charitable trust financial controller Jeff Goddard, Lerwick South councillor Jonathan Wills has repeated his concern that members have no idea what the Shetland public’s funds are invested in and called for an examination of ethical investment portfolios.
He said: “As a result, we are almost certainly still earning money (albeit less than before) from tobacco and mining companies, for example, some of which have deplorable records on environmental destruction, the suppression of workers’ rights and financial corruption. This seems to my simple mind an unacceptably amoral stance for trustees and councillors to take.”
Dr Wills is raising a recent High Court ruling in England which he believes shows that trusts and other bodies are “entitled to make ethical investments on moral grounds and are not obliged solely to consider financial returns”. He is keen for a comparison of ethical funds and tracker funds to be made and intends to ask fund managers for their professional advice on ethical investments this week.