U.K. local authority pension funds returned an average of 17.5% in the year ended March 31, according to The WM Co., London.
Local authority funds were outpaced by all U.K. pension funds, which chalked up a 17.7% average return during the 12-month period. Over 10 years, however, the government funds earned a 14.2% compound-annualized return, compared with 13.9% for all U.K. pension funds because of a lower exposure to property.
The best-performing sector during the 12-month period was overseas equities, at 26.4%, compared with the Financial Times-All World (ex-U.K.) Index return of 15.4%.
On average, local authority funds have one-quarter of their assets invested in overseas equities, including a double index weighting in continental Europe and a triple index weighting in the Pacific Basin (ex-Japan).
U.K. real estate was the second-best performer at 26.2%.
In addition, externally managed funds achieved a 17.8% return, vs. 16.8% for internally managed funds. Stock selection was the major cause of the difference, particularly in U.K. equities, where externally managed funds returned 16% compared with 14.3% for internally managed funds.