Agenda item

Report of the Director of Finance.

The Committee considered a report from the Fund’s Investment Advisers, Aon Hewitt, on Quarterly Trigger Monitoring in line with its function to administer all matters concerning the Council’s Pension investments in accordance with law and Council policy as conferred by Part 3A, Terms of Reference of the Council’s Constitution.

Dave Lyons, Aon Hewitt, outlined the purpose of the report which was to provide an update on the status of three de-risking triggers which the Committee had agreed to monitor and which related to:

·                     Fund’s funding level

·                     Yield triggers based on the 20 year spot yield

·                     Aon Hewitt’s view of bond yields.

Aon Hewitt did not recommend de-risking actions at the current time.  In response to a question on the implications of de-risking, Dave Lyons, Aon Hewitt, explained that this would entail a switch from more risky assets to bonds but that this was not necessarily a straight forward process.  The criteria were subjective and further discussions would be required.  A comprehensive report exploring the implications of de-risking would be submitted as part of the Investment Strategy review to the next meeting. Howard Bluston, co-optee, commented that such a report may be too late in the context of the post-Trump euphoria.

Some members of the Committee remarked that the Council’s existing decision-making structures did not allow for decisions to be made quickly which matters such as diversifying would require.  The Chair stated that meetings of the Pension Fund Committee could be called at short notice, particularly if there was a requirement to make urgent decisions.

The Independent Advisers referred to the equity allocation and the increase in value of the mandates beyond their strategic allocation.  It was therefore essential that mechanisms were in place to allow decisions, for example on re-balancing, to be taken at short notice so that proposals/instructions were actioned.

The Chair invited their suggestions and referred to a previous such suggestion in relation to property investments which would be reported to the next meeting. 

The Independent Advisers referred in particular to the Oldfields allocation which, at the end of February 2017, appeared to be 3% above its strategic allocation.

Members of the Committee discussed the suggestions for re-balancing put forward and commented on the need to take a structured view.  They explored the benefits of the suggestions and were advised by Aon Hewitt that any re-setting of risk in certain elements of the overall fund was entirely proper and it would be reasonable to retain cash which would make it easier for the Committee to move the money into another fund such as property, should it take such a view at its June 2017 meeting.  The Committee considered if adhoc decision-making was appropriate in this instance and upon further advice that, in light of their previous concerns over Oldfields, it would be prudent to hold cash, it was

RESOLVED:  (unanimously)  That

(1)          Oldfields’ global equity allocation be reduced by approximately 2% to their strategic asset allocation and that the sum realised be held in cash;

(2)          Aon Hewitt be requested to submit a report setting out proposals on how the cash could be re-invested both in the short term and strategically.