Agenda item

Report of the Director of Finance.

The Committee received a confidential report from Aon Hewitt, Council’s Investment Adviser, which set out a future investment strategy for the Pension Fund.

Colin Cartwright, Aon Hewitt, introduced the report and outlined the salient points in his report.  He advised that the Committee needed to take a decision on whether or not to invest in Diversified Growth Funds (DGF) with the London Collective Investment Vehicle (CIV) and explained the following types of DGF in which the investments could be made:  Capital Preservation Manager, Growth Orientated Manager and Absolute Return Manager.  He made a minor correction on the investment styles of the four DGFs currently available on the London CIV.

Colin Robertson, Independent Adviser, expressed disappointment that the CIV did not have any ‘Absolute Return Managers’ and suggested that the CIV be lobbied to ensure such availability.  He commented on the suitability of the DGFs available and suggested that, as a result, the Committee may wish to delay the decision, potentially investing in due course in absolute return products not classified as DGFs.  Richard Romain, Independent Adviser, did not support ‘Absolute Return Strategies’ but he too suggested delaying the decision until monthly bar charts of CIV’s DGFs were available, including the equity drivers.  He suggested that all four Managers on the London CIV be invited to the session on ‘Meet the Managers’ in October 2017 prior to taking a decision.  There was a differing view from Colin Robertson as two of the four Managers were rated as ‘qualified’ by Aon Hewitt and this provided an opportunity for ‘others’ to be invited to the session.  The Committee would then be required to take a decision at its November 2017 meeting but that it needed to be mindful of the costs involved.

An officer referred to the letter from the Minister for Local Government (agenda item 8 and Minute No. 231 refers) and the requirements set out therein.  The Director of Finance advised on the need to avoid conflict and the possible implications of any conflict.  A Member was of the view that the intention to diversify was being frustrated and that the main driver was performance and the liquidity of the Pension Fund.

The Committee discussed various alternatives  including retaining the proceeds of equity sales in cash, delaying the sale of equities until the CIV DGF managers had been interviewed and investing in the existing DGFs.

It was agreed to meet the following Managers: Insight, Standard Life (GARS), Ruffer, Newton and Oldfield. 

Colin Robertson, Independent Adviser, stated that the driver was to reduce equities and it might be prudent to take a decision on this matter sooner rather than later.  Following further discussion and having considered alternatives, the Committee

RESOLVED:  That

(1)          the equity allocation be brought down to benchmark, including reducing the investment in passive equities;

(2)          the allocation to Standard Life (GARS) and Insight beincreased equally from the proceeds of the equity sales;

(3)          a decision on the potential for using DGF Investment managers available through the CIV be made at the next meeting of the Committee following the ‘Meet the Managers’ session on 11 October 2017;

(4)          a ‘road map’ to the CIV was essential and that Equity Managers be subject to a further discussion at the November 2017 meeting of the Committee.