P&R have been urged to take independent advice to find out what is going wrong with Guernsey’s underperforming investments.
Deputy Jennifer Strachan has rung the alarm bell – warning that the current oversight system is not working, with the firm that currently advises the States Investment Board (SIB) effectively “marking their own homework”.
Deputy Strachan also refuses to accept that underperformance can be blamed on “legacy investments”, with all but one of Guernsey’s currently underperforming funds being set up by the current SIB and the current advisor.
Deputy Strachan’s comments were made after P&R responded to a series of Rule 14 questions she lodged focusing on “investment underperformance and management risk”.
She’d asked about the status of the General Investment Portfolio and the Public Servants’ Pension Scheme Portfolio which are estimated to have underperformed by an estimated £85 million when compared to the Long-Term Target (real return) benchmark and underperformed by an estimated £312m when compared to the separate Policy Benchmark.
The figures came from the SIB 2025 Annual Report, with Deputy Strachan describing them as “particularly troubling when in recent buoyant investment markets such targets were relatively easy to outperform”.
This underperformance is deeply concerning
deputy jennifer strachan
Responding, P&R offered alternative figures that focused on percentages rather than sterling terms, saying percentages offered a “more consistent basis for comparison over time and against benchmarks”.
Acknowledging there has been ‘underperformance’ over the last three years, P&R disputes this equates to “consistent and significant underperformance against the Long-Term Benchmark”, explaining that “early signs indicate that the current asset mix is capable of meeting the Long-Term Benchmark return”.
The Committee said it is also “satisfied that the work performed by the SIB in respect of setting the Long-Term Benchmark and the SAA (and by extension Policy Benchmark) to achieve the long-term benchmark is appropriate”.
P&R has also explained that “accountability is layered with the governance structure”, in response to questions about oversight of the funds.
Deputy Strachan said not all of the questions were answered properly, so “in the absence of their own corrected figures, or of P&R disputing my calculations, I assume my figures are approximately correct”.
“I specifically expressed them in money terms to highlight the scale of the issue in terms that would be easily understood, and so the magnitude of the issue was clear,” she explained.
“After all, one would not want to place money in a bank account that paid interest of 3% less than the market rate for three years.
“Unfortunately, the responses indicate there seems to be little curiosity about what is going wrong with the repeatedly missed benchmarks, nor even an acknowledgement that there is a problem.
“To repeatedly underperform all of the benchmarks year after year (except for one benchmark in 2024) indicates that something is going wrong. I asked about the most recent three years since they give us a three-year track record, which is an industry standard period for review.”
Now she has some answers to her questions around investments and performance, Deputy Strachan has pointed the finger at both the SIB and Cambridge Associates the States’ investment advisor.
“My biggest takeaway from the responses is that we have an oversight system that is not working,” she said.
“P&R seem to have asked the SIB and Cambridge Associates, the investment advisor, to explain why they have underperformed. This is effectively letting them mark their own homework. I would urge P&R to get some independent advice as to what Is going wrong.”
Deputy Strachan also disputed the suggestion that underperformance is an historical issue.
“One repeated excuse for the underperformance is legacy investments, but then why are all but one of the underperforming funds, set out in their own Annual Report, funds or mandates that were appointed by the SIB and the new advisor?” she asked.
“I would like this set of Rule 14 Questions to be a wakeup call to the States to get its own house in order, and for me this means getting its investments under control. This is arguably, given the scale of the missed opportunity for investment returns, a bigger issue than debates over capping government expenditure and extra taxes.”
