To review the Agenda and Minutes of the Pensions Committee meeting held on 9 October 2020:
· Local Government Pension Scheme (LGPS) Central update
· Pension Investment update
· Business Plan
· Risk Register
· Pension fund Audited Annual Report and Accounts 2019/20
· Worcestershire County Council Pension Fund Administration Budget Forecast Outturn 2020/21
· Training update
· Forward plan
The Agenda papers and Minutes have previously been sent to members.
Minutes:
The Board received the Agenda papers and Minutes of the Pensions Committee meeting held on 9 October 2020. Members received a brief summary and commentary on various items considered by the Committee.
In the ensuing debate, the following points were raised:
· Rob Wilson indicated that since the Committee meeting, the Pension Fund Accounts had been signed off by the external auditor with an unqualified opinion and within the statutory deadline
· Did the problems with the pooling arrangements, as referred to in the Committee minutes, relate to multiple investment manager approach taken by LGPS Central? Rob Wilson advised that the Fund had undertaken due diligence on the three managers appointed by LGPS Central for investment in Emerging Markets under this model. The performance of one of the managers was now undermining the overall performance of the portfolio. Efforts were therefore being concentrated on monitoring the performance of this particular investment manager. A review of LGPS Central was also being undertaken to ensure that they were delivering the products that best suited partner funds. The outcome of this review would be reported to the Pensions Committee and the Board
· It appeared that historically this Fund had had an appetite for risk in terms of its investment approach. Had the Fund ever used a multiple risk manager approach before? Rob Wilson indicated that the Fund had not adopted the multiple manager approach previously because it was of the concern that the poor performance of one manager would impact on the other managers in the portfolio. LGPS Central had to account of the risk appetite of all the partner funds and therefore had adopted the three-manager approach because of the size of the Assets under management and deemed a less risky strategy. The current model would be monitored and if the performance of the particular manager did not improve, consideration would need to be given to press for the adoption of a two-manager approach
· The Chairman of the Pensions Committee indicated that debates continued between partner funds about the merits of the multiple manager approach. The key issue was to ensure that LGPS Central monitored manager performance. The Fund would monitor LGPS Central’s performance and therefore it was important for representatives of this fund to meet Fund managers directly. An open day was being held next week with the Emerging Markets managers and members of the Board were welcome to attend
· The Chairman suggested that a sub-group be established to undertake a “deep-dive” into the pooling arrangements and in particular the approach of LGPS Central given that this Fund had historically been a passive investor and as such returns would take longer to achieve
· Was the threat from the Government to pension funds should pooling arrangements fail as referenced in the Committee minutes, a realistic proposition? The Chairman of the Board responded that the Government had not made any threats at the moment however there was always the idea that if pooling did not work then an alternative approach would be needed. The principle for the establishment of pooling arrangements was that by bringing partner funds together, a better deal could be achieved for all. However, the way in which the pooling arrangements came into existence undermined this tenet with concerns that partner funds were being dictated to by pools.
The Board noted the Committee Reports and Minutes.