Agenda item

The Committee considered the Pension Investment Update.

Philip Hebson, the Fund’s Independent Investment Advisor introduced the report and made the following points:

·         The Fund had a total commitment of £150m to the Gresham House Forestry Fund VI of which £50m had been committed to stage one. The commitment to stage two of the Fund had already been increased to £75m but an opportunity had arisen to accelerate that investment with an option to invest a further £10m to stage two. This investment would be in forestry located in Wales and would not only provide diversification from a geographical perspective but also in terms of species of tree and therefore lessen the risk of disease. The overall commited investment in the Fund would remain unchanged. This investment was not part of the LGPSC portfolio of investments with partner funds

·         The Fund had been speaking to investment managers and LGPSC to get an understanding of the social investment opportunities (other than social housing) that would satisfy the requirements of the Government’s Levelling Up agenda. It should be noted that the Fund already had a social element within its portfolio. The outcome of this fact-finding exercise would be reported back to this Committee

·         The funding level was estimated to be 100% in March 2022 but markets had been volatile since then. Despite this volatility, the Fund remained at a healthy funding level due the impact of the diversification of assets and the Equity Protection Strategy. Mercer, the Fund’s actuary had taken a more pragmatic approach than expected and recognised the long-term nature of investment

·         The Equity Protection Strategy had been effective in protecting the Fund from the market falls. However, the point was approaching when a decision would need to be made whether to continue with the Strategy should the market drop to such a low level that the benefits to the Fund were negligible

In the ensuing debate, the following points were made:

·         In response to query on Forestry, Philip Hebson explained that different timber was used for different businesses therefore it was important to have a diversification in the type of trees grown. This would ensure long-term income generation for the forestry investment and mitigate the impact of disease. This was important because the forestry industry could insure against any circumstances apart from the impact of disease. The forestry industry was able to mitigate the risk of fires with appropriate planning, diversification of tree species and fire breaks

·         The proposed increase in the commitment to the Gresham House Forestry Fund VI from £75m to £85m was supported. 

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 strategy be noted.

e)     The update on Responsible Investment activities, Local Authorities Pension Fund Forum (LAPFF) (Appendix 3) 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 4 to 6); and

g)     The Fund’s commitment to the Gresham House Forestry Fund VI be increased from £75m to £85m.