The average return of a local authority pension fund was 5.6 per cent in the second quarter of 2016, according to PIRC.

Its Local Authority Pension Performance Analytics service found that this is the best quarterly result of the last three years, which was unexpected given the current economic uncertainty.

PIRC said the EU referendum was the key influencer of markers in the second quarter and optimism and an increased level of certainty about the UK staying in was replaced by shock when the country voted to leave.

“Equities, which still make up the majority of pension fund investment delivered strong results- overseas holdings benefited from the marked decline in sterling while UK equity performance was held up by the high level of overseas earnings of many companies and the continued momentum in oil and gas stocks from rising commodity prices,” it said.

Furthermore, PIRC said bond performance was extremely strong over the quarter as the market factored in an imminent interest rate cut. “Whilst good for investment returns, as always, the reduction in yield will have increased the value of liabilities,” it said.

In addition, over the medium and longer term fund performance remains extremely strong with the average fund returning almost 9 per cent p.a. over the last three years, 8 per cent pa over the five years and 7 per cent over the 10 Years.

PIRC head of performance services Karen Thrumble said: “There has been a great deal of focus on the ability of local government pension funds to be seen to deliver. These results confirm that the investment strategies have been successful in producing returns well in excess of both inflation and actuarial assumptions, through volatile and different market conditions”

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