News / SIC funds mushroom
THE RECOVERY in the world’s financial markets boosted Shetland Islands Council’s funds by a remarkable £125 million in the past financial year, though they are now on the decline once again.
Last year’s increase comes as a welcome relief to the council after the woes of the credit crunch in 2007 and 2008 when investments fell worldwide.
The council’s pension fund, one of the best funded in Scotland, rose by 51 per cent from £147 million to £222 million in the year up to March 2010 thanks to the global recovery in equities and bonds.
The council’s oil reserves also did well, earning £50 million in the last financial year. However £35 million of this was spent by the council on making up the shortfall in its revenue budget and to support its capital programme, leaving the fund worth £231 million, up from £216 million in 2009.
Since March both funds have reduced in size again, reflecting the volatility in the markets as jitters ripple through the financial world about problems in Europe and Korea.
Independent monitor Karen Thrumble said some of the council’s fund managers had done well, but others raised cause for concern.
Blackrock, Baillie Gifford and Insight were praised for generating a good return on investments, however dissatisfaction was expressed about the performance of Baillie Gifford on a separate fund, as well as GMO, Schroders and Record.
The pension fund increase was helped by the fact that employers’ contributions exceeded expenditure on pensions by £8 million, even though the Shetland scheme has one of the lowest employer contributions in the country.
It remains unclear whether the Scottish government will go ahead with a plan to amalgamate all 11 Scottish local government pension schemes, which is currently under review.
The Scottish government has introduced new regulations which will allow the council to adopt an investment strategy for its other reserves, which will be outlined on 30 June.
These reserves are held in the Repairs and Renewal Funds, the Reserve Fund, the Marine Fund and the Insurance Fund.
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