Oxford University Endowment Returns 16.4% for 2016

Oxford University’s £2.34 billion Oxford Endowment Fund returned 16.4% for the fiscal year ending Dec. 31, 2016, according to its annual report.

The fund also reported 11% annualized returns over a three-year period, 11.8% annualized returns over a five-year period, and 10.1% annualized returns since the fund’s inception in 2009. The fund’s cumulative return since inception is 116.7%.

“We are pleased to report that we have exceeded our investment objective of generating a 5% real return for our investors,” said the report.

Private equity was the fund’s best-performing asset class, with three- and five-year annualized returns of 23.7% and 20.5%, respectively, with an annualized return of 15.1% since its inception.

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“In the last three years, private equity has begun to make a significant impact,” said the report. “It takes several years to build meaningful investments in private equity, and the care taken in selecting strategies and managers has paid off.”

The public equity asset class has returned three- and five-year annualized returns of 11.7% and 13.9%, respectively, while returning an annualized return of 9.1% since inception. The endowment fund also touted the benefits of active management during a year when many pension funds vowed to reduce or eliminate actively managed investments due to the high fees.

“Our strongest-performing public equity manager has an annualized five-year return of 21.4%,” said the report, “proving, if done well, active management adds considerable value to the Fund.”

The fund’s credit asset class has produced three-year annualized net returns to Dec. 31, 2016, of 15.8%, five years of annualized returns of 14%, and 12.4% in annualized returns since the fund’s inception. And the property asset class had three-year annualized returns of 9.1%, five-year annualized returns of 9.2%, and an annualized return of 9.1% since inception.

“While we invest for the long term, over the course of 2016 we were frequently reminded of the need to manage macroeconomic and political risks,” said the report. “Our approach to risk management is not to spend significant amounts of time forecasting precise outcomes of inherently unstable events, but to ensure that the Fund has the appropriate balance of opportunities and protections in a range of developments.”

The report said that the most significant risk for UK investors in 2016 was the EU referendum vote. “We spent time understanding the potential impact of this specific binary event, and planned clear practical outcomes for either result,” said the report.

“Further to our analysis, we came to the conclusion that in the event of an ‘out’ vote, Sterling would be the release valve and hence moved our currency exposure to the lower end of its permitted Sterling range,” said the report. “We moved quickly to add capital to public markets which fell significantly, using our position as long-term investors to take advantage of a market overwhelmed by short-term fear.”

Tags: Endowments, Fiscal Year, Oxford University

Tata Steel is reportedly close to finalizing a deal that would cut loose its £15 billion ($19.5 billion) British Steel Pension Scheme (BSPS), a requirement for its proposed merger with German industrial group Thyssenkrupp’s European steel business.

Sky News reported that the Indian steelmaker will announce on Aug. 11 that it has signed a regulated apportionment agreement (RAA) with UK pensions regulators, and the company’s pension trustees.

In May, Tata’s British unit, Tata Steel UK Limited, and unions struck a deal that would reduce benefits for current employees, although the decision would affect all 130,000 members of the pension, including retirees. Tata Steel UK has offered to pay £550 million into its now-closed pension plan and give the fund a 33% stake in its UK operations.

At the time, Lesley Titcomb, chief executive of The Pensions Regulator, said that the key commercial terms of the RAA had been agreed to in principle between the company and the BSPS trustee.

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“Pension restructurings which involve an RAA are rare,” said Titcomb in a statement, “and we will only approve an RAA where stringent tests are met, so that they are not abused by employers seeking to inappropriately offload their pension liabilities.”

Tata Steel UK has said that once the RAA is signed, all current and retired members of the BSPS would be offered an option either to transfer to a new pension plan sponsored by the company offering modified benefits, or to remain in the BSPS and receive Pension Protection Fund (PPF) compensation. For this to come into effect, said the BSPS, the new pension plan will be subject to certain qualifying conditions relating to factors such as size and funding level. If the qualifying conditions are not met, the new pension plan would not come into effect and all members of the BSPS would receive PPF compensation.

“Although the PPF is an important safeguard for pension schemes generally, the Trustee believes that the BSPS has sufficient assets to offer members the potential for better outcomes by enabling them to transfer to another scheme offering modified benefits,” BSPS Trustee Chairman Allan Johnston said at the time of the deal in May. “For most scheme members, these modified benefits are expected to be of greater value than those they would otherwise receive by transferring into the PPF.”

Tags: Tata Steel, Tata Steel UK, UK Pensions