Agendas, Meetings and Minutes - Agenda item

Agenda item

Strategic Asset Allocation Review (Agenda item 7)

Minutes:

The Committee considered the Strategic Asset Allocation Review.

 

In the ensuing debate, the following points were raised:

 

·         In response to a concern about the lack of reference in the Review to ethical investment, Rob Wilson, Finance Manager – Pensions Treasury & Capital explained that ethical considerations had been included in the Responsible Investment section of the report. It was recognised that more work needed to be done to strengthen the Responsible Investment arrangements

·         It was difficult to make a fair assessment of the performance of the mandate of an active manager over a 10 year period. Philip Hebson, Independent Advisor to the Fund commented that the Fund took a long-term view of investments, recognising that circumstances changed over time and that riskier investments could be subject to periods of market volitivity. The Fund had a good track record of maintaining dialogue with investment managers to understand the rationale of their investment style

·         In response to a query, Philip Hebson indicated that it was important that the Fund evolved over time, responding to emerging issues. Responsible Investment was recognised as an important emerging issue which would be further embedded as a key consideration in the determination of future investment

·         The Chairman of the Committee encouraged all members to attend pension training events. He highlighted a SAB training event on 15 January 2020 and a Responsible Investment training session on 31 January 2020

·         In response to a query about the future balance of investment between property and infrastructure, Philip Hebson advised that after the 2016 Strategic Asset Allocation review the Fund had struggled to find suitable investments in the property sector at attractive values, therefore investment had been focused on the infrastructure sector. This investment approach was likely to be repeated in the future

·         Would the outcome of the general election have any impact on the Fund’s approach to asset allocation or equity protection. Philip Hebson advised that the election would have no impact the Fund’s strategic approach but could impact on the timings. The assumption in the review had been based on business-as-usual albeit cognisant of recent events

·         A specific reference to the need for investments to be signed up to the Code of Transparency should be included in the SAA recommendations

·         In response to a query about the Fund’s approach to equity protection, Philip Hebson indicated that a more detailed examination of the main trigger points for the Equity Protection Strategy was being undertaken. The Fund needed to be smarter in the way it implemented the Strategy, for example, there could be periods where it would be beneficial to the Fund not to implement the Strategy. There was now a greater understanding of the sophisticated nature of the Strategy than when it was originally introduced and it was important that members had an understanding of whatever approach was adopted by the Fund

·         Was the Fund ready to move to the next stage of the Equity Protection Strategy? Philip Hebson commented that the next phase had been agreed in principle however it was important to remember that equity protection was an investment risk tool and should be used as such and not embedded in the investment strategy. It was vital that the Fund maintained control over the Strategy and that members received further training on it.

 

RESOLVED: that

 

a)    the Strategic Asset Allocation recommendations set out in paragraph 5 of the report be approved subject to the inclusion of specific reference to the need for investments to be signed up to the Code of Transparency: and

 

b)   the Strategic Asset Allocation actions set out in paragraph 7 of the report be included in the Forward Plan of the Committee and the Pension Investment Sub-Committee.

Supporting documents: