Agenda item

The Committee considered the Pension Investment Update.

Philip Hebson, the Independent Investment Adviser to the Fund introduced the report and made the following points:

·         The Fund was now receiving drawdowns from its property and infrastructure investments and had reached a point where it might be appropriate to implement a redeployment strategy

·         Fee negotiations with Stonepeak had progressed satisfactorily and although a reduction in carry had not been possible, it had been possible to agree other areas of fee reduction

·         Unfortunately it had not been possible to agree any fee reductions with First Sentier at this stage and therefore the Fund might wish to reconsider its desire to invest in this fund if a satisfactory agreement could not be reached

·         Conversations were being held with Gresham Forestry to establish an appropriate core base investment approach. It was important for the Fund to establish investment opportunities whilst being aware of the political aspects relating to forestry

·         The Fund was fully funded as at the end of June 2021. However, markets had become increasingly volatile since then and he anticipated a sustained period of market volatility. The next steps that the Fund took to protect its funding level were therefore important. The Fund needed to ensure that it was sufficiently diversified to be able to manage any sudden fluctuations in the market and protect against down side movement

·         Fortnightly meetings were being held with River and Mercantile to ensure that the Equity Protection Strategy was working for the benefit of the Fund. Given the market conditions, it was important to manage this strategy proactively

·         The Fund was working with LGPS Central at determining more defined outcomes for Responsible Investment.

In the ensuing debate, the following points were made:

·         In response to a concern about the Fund’s exposure to the US market, Philip Hebson indicated that the US market was a difficult market to manage in that it contained a number of big companies that were high risk but high reward. These risks needed to be managed appropriately and active managers needed to be able to identify new investment opportunities

·         In response to a query, Michael Hudson indicated that Mercers, the Fund’s Actuary, did engage with the Fund but he emphasised that the Triennial Review was essentially a number crunching exercise. It was important that the risk pots were developed to align with the risks of the Fund’s employers

·         There was a massive exposure for district councils especially in circumstances where members left the scheme

·         Michael Hudson commented that the funding level would only be a cause for concern if the Fund dropped below a 90% funding level.

RESOLVED that:

a)     The Independent Investment 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 and the historical performance detailed in Appendix 3 be noted;

e)     The update on Responsible Investment activities, Local Authorities Pension Fund Forum (LAPFF) (Appendix 4) and Stewardship investment pooling be noted; and

f)      The update on the LGPS Central report on the voting undertaken on the Funds behalf be noted (Appendices 5 to 7).