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 total of Committed Infrastructure Investments stood at £424m (59%). It was anticipated that this level of commitment would increase as more of the Fund’s Infrastructure projects materialised

·         The Fund’s investment in the Gresham House Forestry Fund had generated a considerable amount of external interest. The Fund was one of the first in the country to pursue property investment of this nature

·         The Fund had a current estimated Funding Level of 103% which was a healthy position. The Fund had benefited from a balanced pool of investments which had provided protection against market movement. If this level of funding could be maintained until 31 March 2022, then conversations would need to take place with the Actuary about the appropriate assumptions to use in the actuarial valuation to maintain stability of employer contribution rates in the future

·         The Equity Protection Strategy had been working effectively for the Fund to date. He would not recommend making any changes to the Strategy before Christmas

·         The Strategic Asset Allocation (SAA) had required a degree of rebalancing, as it was outside its normal bounds mainly due to the strong performance of equities. A lot of work had taken place since the last SAA but some more fine-tuning was still required. However, he would recommend a period of stability before any further major changes to the SAA were considered.

In the ensuing debate, the following points were made:

·         Consideration should be given to issuing a press release concerning the Fund’s proposed investment in Gresham House Forestry

·         In response to a query, Philip Hebson confirmed that an external provider would be invited to review the SAA again as was done previously. Unlike last time, the review would take place after the valuation had been completed, not before

·         It would appear that the vast majority of funds were pursuing a global equity mandate whereas this Fund was pursuing a regional allocation approach. It would be interesting to get the views of an external provider on the benefits/disbenefits of each approach. Philip Hebson commented that the US market made up a large percentage of the global index. The US market relied on the performance of a small number of major stocks. Therefore, the global equity mandate was very vulnerable to the poor performance of major US stocks. He considered that there were more opportunities for the Fund outside the US market

·         The Government advice on Climate Change Financial Reporting was awaited. This advice would have an impact on the Fund’s approach to Responsible Investment

·         It was noted that the investment of the existing passively managed equities target allocation equated to circa £200m.

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 be noted;

e)    The proposed 6% decrease in the strategic asset allocation to Market Capitalisation Passive indices and the increase of 6% to the Actively Managed Equities to allow for the investment in Sustainable active equities be agreed as set out in the table in paragraph 15 of the report;

f)     The update on Responsible Investment activities, Local Authorities Pension Fund Forum (LAPFF) (Appendix 3) and Stewardship investment pooling be noted; and

g)   The update on the LGPS Central report on the voting undertaken on the Funds behalf be noted (Appendices 4 to 6).