The SIB said this “outcome was a rare year where both bonds and equities produced negative returns for investors”.
Of the two funds named above, the Consolidated Investment Fund holds investments on behalf of the Policy and Resources Committee while the Common Investment Fund holds money for Employment and Social Security for things like benefit payments and pensions.
The decrease in the value of the Consolidated Investment Fund has been blamed on factors including “the marked rise in inflation, following the extreme fiscal and monetary stimuli of prior years” and was “exacerbated by supply side shocks following the Russian invasion of Ukraine, supply chain constraints post-covid, and pandemic restrictions in China”.
The SIB report explains that “the response of central banks to inflation in double digits was initially slow but then interest rates began to rise rapidly towards more “normal” levels in a historical context. Both bond and equity markets found this period of adjustment challenging. As yet, recession forecasts have not been fulfilled but the weak links in the global economy, whether the rout in UK Gilts last Autumn, or more recent US and European bank problems, are beginning to snap.”
The SIB annual report is focused on analysing what happened during 2022. It does not offer any outlook to the future returns on investments.
The 2022 States Investment Board annual report can be read HERE.
During its first year, the SIB has appointed Cambridge Associates as its advisory partner based on a recommendation from a prior governance review.
Together, the SIB and Cambridge Associates have ‘reviewed and refreshed’ the investment strategy “to ensure that the States’ funds are optimally positioned on a risk and return basis”.
Another recommendation from that prior governance review was implemented relating to the structure of the States’ investments.
With the two portfolios separately maintained, a temporary project to bring them together is coming to an end and will be assessed with an update in next year’s annual report which will be appended to the States Accounts published in June.
It had also previously been agreed that the Public Servants’ Pension Scheme should be held on a segregated basis – work to separate that out started in the last quarter of 2022 and will soon conclude with an update expected next year too.