Agenda item

The Committee considered the Pension Investment Update.

Philip Hebson and Rob Wilson introduced the report and made the following points:

·         The Pension Investment Sub-Committee had agreed to allocate funds to the LGPS Central Infrastructure sub-fund subject to due diligence being undertaken and ensuring it met this Fund’s investment objectives

·         The estimated funding level at the end of September 2020 was 92%. This had dipped through October but recovered in November to an estimated level slightly in excess of September

·         The Equity Protection Strategy had been remodelled and was now more active in nature. Fortnightly meetings were held with River and Mercantile to monitor the position. The gains experienced by the S & P 500 investment had led to discussions about whether to restructure the Strategy and to lock in the protection of those market gains at no expense to the Fund

·         Strategic Asset Allocation – Two pieces of work had been commissioned from Mercers and LGPS Central to understand how Nomura’s performance compared with other investment managers in the far east markets. It was difficult to find like-for-like comparisons but the work did shine a light on different ways of working. A meeting would be held with Nomura to see whether performance could be improved internally. A final decision would not be made until the outcome of the Environmental, Social  & Governance (ESG) review which would be reported to the March Committee meeting

·         It was anticipated that the outcome of Minerva’s report on the Fund’s ESG and mapping audit would be available by 18 December to share with the ESG working group. Workshops for all Committee, Sub-Committee and Board members would be held on 5 January and 5 February to look at the findings.

In the ensuing debate, the following points were made:

·         In response to a query, Philip Hebson advised that there was no procedural cost to the Fund for making changes to the trigger points within the Equity Protection Strategy because of the protection position compared to the underlying equity. It was therefore considered appropriate to make a change to the trigger points now rather than wait until January 2021 when circumstances might change

·         The funding level was encouraging and welcomed given this particularly difficult year

·         It was queried why there was no allocation target for the equity protection. Rob Wilson responded that this was due to it being part of the passive allocation target and not shown separately

·         In response to a query, Rob Wilson undertook to establish the reason for the delay in LAPFF arranging meetings with Lloyds Banking Group, Aviva Group and Berkshire Hathaway in relation to climate finance.

RESOLVED that:

a)    The Independent Financial Adviser's fund performance summary and market background be noted (Appendices 1 and 2);

b)   The update on the Investment Managers placed 'on watch' by the Pension Investment Sub Committee be noted;

c)    The funding position compared to the investment performance be noted;

d)   The update on the Equity Protection current static strategy be noted;

e)    The update on Responsible Investment activities (Appendix 3) and Stewardship investment pooling and the Stewardship Code be noted;

f)     The update on the LGPS Central report on the voting undertaken on the Funds behalf be noted (Appendices 4 to 6); and

g)   The update on the development of a Climate Risk Scenario Monitoring report and the Environment Social and Governance (ESG) and Sustainable Development Goals (SDG) mapping Audit exercise be noted.