The City of Westminster Pension Fund achieved an investment return of 5.3% for 2017/18, while the Royal Borough of Kensington and Chelsea Pension Fund achieved a 3% return for the same period.
For Westminster, the 5.3% return was above its strategic benchmark of 3.7%. It has outperformed its benchmark on an annualised basis over three and five years and also since inception, by 9.8% against 8.9% for the latter. Kensington and Chelsea said that after a 25% return in 2016/17, its annual return “slowed to a more modest increase of 3% in 2017/18 due to uncertainty in the global markets toward the end of the period.”
The two funds had similar asset allocations at the end of 2017/18, with Westminster allocating 22.3% to UK equities, 53.9% to overseas equities, 14.4% to fixed income and 9.4% to property. Kensington and Chelsea had as its target allocation at the end of 2017/18, a 60% allocation to global equities, 30% to absolute return fund, 5% to private equity and 5% to property.
As the three boroughs make up the tri-borough group for administration purposes, and share similar investment views, it is perhaps not surprising that the line-up of fund managers is similar, with both funds using Baillie Gifford, LGIM and Longview Partners. In its annual report, Westminster stated that its portfolios managed by Baillie Gifford and Majedie have been transferred to the London CIV, resulting in significant investment fee saving. It added: “The fund has also benefitted from lower fees negotiated by the CIV on its Legal & General passive equities portfolio. Preparatory work continues for the transition of the Longview portfolio to the CIV.”
In terms of funding, Kensington and Chelsea said that its latest actuarial update has led to its funding level improving to 123%, up from 103% in the 2016 triennial valuation. Westminster’s funding level was 80% at the time of the 2016 triennial valuation.