News / Buoyant markets help SIC reserves to recover
FOLLOWING years of declining funds, Shetland Islands Council’s reserves seem to have turned a corner and have grown by a massive £74 million to £278 million during the last financial year.
The local authority’s pension pot meanwhile has increased by £34 million to reach £367 million in the same year.
Despite these figures, councillors will be advised on Wednesday morning to express their dissatisfaction with most of its fund managers for not meeting high profit targets set by the finance department.
In two detailed reports before councillors, the executive manager for finance Steve Whyte sets out how the council earned £28 million on its investment worth £204 million, and was also able to add a further £46 million from other sources.
These injections were partly made up of loans taken out on future projects, such as the new Anderson High School, and temporarily invested in the money markets were the return is higher than the interests paid on the loan.
The reserves further benefited from government payments following the agreement on the council’s housing debt as well as around £4 million from the Shetland Development Trust.
Fund managers Baillie Gifford, Insight and BlackRock all missed their target for 2014/15 though but generated returns above expectation over a five-year period.
Finance chief Whyte said: “During 2014/15 the equity, bond and property markets all rose significantly producing good returns.
“These markets along with fund managers’ management of the funds helped to contribute £28million in investment return to the council’s reserves.”
Meanwhile the council’s pension fund is administered by five fund managers; Kleinwort Benson, M&G, Newton, Schroders and BlackRock.
The Both Schroders and BlackRock underperformed during 2014/15, while the other three companies were only given their investment mandate in December last year.
In his second report to councillors, Whyte reports that the market value of the pension fund had increased by £34 million, or 10.2 per cent, during 2014/15.
Investment returns were £30 million while an additional £4 million were gained because more employer and employee contributions were higher than pension payments made.
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