Agenda item

The Committee considered the Pension Investment Update.

In the ensuing debate, the following points were made:

·         Philip Hebson, independent advisor to the Committee indicated that meetings had been held with representatives of the Fund’s smaller investment companies eg Green Investment, Venn, First State and AEW. These meetings had been positive and officers had been encouraged by the outcome of their presentations

·         It was queried why value of the Fund had decreased from December 2018 to March 2019, Rob Wilson, Finance Manager - Pensions Treasury ? Capital explained that in December the liabilities had been based on a like for like comparison to the assumptions used in the 2016 valuation. The March 2019 valuation was based on updated actuarial assumptions and the actuary had taken a more prudent view of our forecast asset returns going forward which impacted on the liability fund valuation

·         In response to a query, Rob Wilson commented that River and Mercantile had been asked to set out in monetary terms the net gain/loss over the period that the Fund had entered into the Equity Protection arrangements. Their findings would be reported to the next meeting

·         In response to a query about the Fund’s asset structure, Philip Hebson indicated that the Fund had had a high exposure to equity investment which had been beneficial to the Fund to this point. The Equity Protection Strategy had acted as an insurance policy to protect these gains. However, the Fund needed to maintain some level of exposure to risk in the future to maintain and potentially enhance the funding level.

·         What were the implications for the Fund if it ever reached a funding level over 100%? Philip Hebson responded that it was difficult to be certain as every fund was different but it was possible in certain circumstances that the Fund might not need Equity Protection and invest in lower risk assets as it would have sufficient funding to be able to cope with any potential falls in the market

·         The Committee should be cognisant of the fact that even though the Fund might be close to 100% funded, some individual employers within the Fund might not be in such a positive funding position

·         In response to a query about the level of investment in higher risk active investments, Rob Wilson explained that a decision would need to be taken about the balance of the Fund’s exposure to active and passive investments

·         There were certain companies that had a strong track record of RI but their behaviour and unwillingness to change gave cause for concern from an environmental perspective. This was a matter that should be raised with the LAPFF.

RESOLVED: that

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

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

c)    The outcome of the transition of the active Emerging Market investments to the LGPS Central Global Emerging Markets Fund be noted;

d)   The update on the transition of the Active Corporate Bonds mandate into the LGPS 'Global active Investment Grade Corporate Bond Fund be noted;

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

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

g)   The update on Responsible Investment activities and Stewardship investment pooling be noted;

h)   The update on the LGPS Central report on the voting to be undertaken on the Fund’s behalf be noted; and

i)     The update on the development of a Climate Risk Monitoring Platform be noted.