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SIC refreshes investment strategy

SHETLAND Islands Council is set to rejig the way it invests its reserves in a bid to get better returns.

Councillors agreed on Wednesday to introduce direct lending into its investment strategy, meaning that money will be lent to medium sized UK and European companies over a five to ten year period.

Over 12 per cent of the council’s £334 million of investments in its reserves will also be re-routed into “diversified alternatives” through lending in infrastructure, real estate and private credit projects over the long term.

A meeting of the full council heard that the current investment strategy is returning around 6.5 per cent a year, with the new approach set to reach the target of 7.3 per cent overall.

The council expects to draw down around £13 million per annum from its reserves.

Finance manager Jonathan Belford said the investment strategy had not been reviewed for some years, with consultants KPMG asked to devise options for how the council could boost its returns.

The council is expected to spend around £500,000 on fund manager fees as the new set-up is implemented.

The new strategy will keep 60 per cent of the reserves tied up in equities between two fund managers.

Councillors were on hand to ask questions about the new scheme, with Lerwick South member Peter Campbell wondering what would happen if the council lent money to a company which then went bust.

KMPG advisor Andy Singh said there are specialists who would aim to recover as “much money as possible” if that situation arose.