Greater Manchester Pension Fund (GMPF) has reported a 4.2% investment gain for 2017/18 in its latest financial report, ahead of its customised benchmark return of 3.3%.
The £22.5 billion fund, part of the £46 billion Northern LGPS pool along with the Merseyside and West Yorkshire funds, said it has consistently delivered annual returns 0.6% higher than that of the average local authority over 30 years, giving it a position in the top decile over various time periods. GMPF reported a return of almost 10% from property and around 9% from alternatives, including an annualised return of 10.2% from infrastructure, which it described as an impressive rate of return for a relatively immature portfolio. GMPF revealed that it had £466m invested in infrastructure projects at the end of March 2018. It has a 5% target allocation to infrastructure but said this would take several years to achieve.
Private equity remains a strong performer for the fund, which uses a vintage decade approach to performance measurement. Under this approach, which it adopted in 2011, the 1980 vintage commitments returned over 12% a year, while the equivalent figures for the 1990 and 2000 vintage decades are over 25% and 9% a year respectively. The annualised, since inception performance for private equity is 16.5% a year to the end of March 2018.
However, government and index-linked bonds produced negative returns in the year to the end of March 2018, while corporate bonds and global credit produced returns of less than 2%. Equities gave returns from around 4% to 6% for 2017/18, with overseas equities outperforming UK equities.
GPMF chair, councillor Brenda Warrington, said that the section on the fund’s approach to climate change risk was a notable addition to the annual report. She commented: “Financial decarbonisation of the economy is a complex and challenging issue, particularly for long-term investors such as pension funds. However, this has not stopped us committing to the Paris Agreement goal of 100% of our assets being compatible with the net-zero emissions ambition by circa 2050.” She added that GMPF is continuing to lead the way on local investment opportunities, supporting the wider economy of Greater Manchester and the North West.