Richard Digard, freelance writer and former editor of the Guernsey Press explains how Guernsey’s capital reserve has grown with a £15m. windfall this year.
The article, which describes the work as an ‘unseen investment revolution’, praises the treasury team at Guernsey’s Policy & Resources Committee.
IAM Advisory is credited as the organisation behind the headline figures, using AMps, or Active Management Performance Standards, our proprietary and innovative approach to risk analysis and control.
AMps addresses one of the central problems in modern investment management - the ever-increasing reliance on benchmarks and market peer group comparisons.
The article first appeared in the Guernsey Press and can be read in full here:
It went largely unnoticed at the time, but some wizardry by the treasury team at Policy and Resources resulted in a £15m. windfall for the island’s Capital Reserve, the pot of money that pays for infrastructure projects.
It’s due to stellar returns on the island’s various investment funds: more than 14% on the £1.7bn Long Term Investment Reserve (which includes the superannuation fund), a near 7% on the £346m. Medium Term Investment Reserve, while the separate £800m. pot overseen by the Committee for Employment & Social Security grew by 12.1%.
While much of that is down to the markets themselves, there has been a quiet revolution behind the scenes in the way Guernsey looks after its/your money.
These considerable sums are now administered on a multi-manager, multi-asset basis, targeting maximum returns with minimum risk.
Without getting too technical, the island now takes a very sophisticated approach to investment and is handling the process rather like a sovereign wealth fund might operate.
And one of the key advisers helping P&R to do so heads Guernsey-based IAM Advisory, having learned his trade while one of the original senior investment managers in Abu Dhabi’s Investment Authority and subsequently as adviser to Oman’s two major wealth funds.
The approach now being followed allows the fund managers to manage money actively while controlling risk centrally and sets them a double test in terms of performance.
The target for the long term fund is UK RPI +4% (+3.5% for the medium term fund) and the managers are also expected to do better than average in the event markets make the headline target a soft one, as happened last year.
For historic reasons, the Social Security fund isn’t included in this ‘sovereign’ approach, and has fewer managers and a different performance target of Guernsey RPIX +3.5%.
It doesn't appear to make much sense to treat that fund separately and I believe discussions are underway about enabling it to take advantage of the more active approach to managing Guernsey’s money which has been in place for a couple of years now.
I mention all this because it’s an indication of some of what’s happening behind the scenes as the old way of doing things gets quietly updated, largely away from the headlines.
The added benefit is that what was expected in the 2017 Budget to be a £14m. shortfall in what could be put into the capital reserve to be spent on building and doing stuff for the island is now actually £15m. to the good.
And that’s thanks to the markets and the fact that government is today looking after your money much more actively.
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