Agenda item

Report of the Director of Finance.

The Committee received a report of the Director of Finance, together with appendices 1-5 of which appendix 4 was confidential, which set out

·                     the draft Work Programme inviting Members’ comments and agreement;

·                     a new investment and management performance dashboard report summarising key fund performance and risk indicators and trigger monitoring report and  PIRC Performance Indicators;

·                     the Fund’s performance to 30 September 2019;

·                     issues raised by Pension Board, if any.

A revised Appendix 5 ‘ Fund Valuation and Performance – March 2019 to November 2019) was tabled at the meeting to ensure that the Committee was availed of the latest position.

The Committee commented as follows:

Draft Work Programme 2019-20

·                     the Investment Strategy Review meeting be given a priority and take place by January 2020.  The Review to address asset classes and investments that are sustainable and low in carbon.  The session could use the Council’s Actuary’s, Hymans Robertson’s, assumption that the McCloud Judgement would not cost more than 3% of the fund’s liabilities;

·                     the ‘Meet the Managers’ session should also be afforded a priority and that it be arranged after the Investment Strategy Review meeting but before the end of February 2020 with a decision on which Managers to invite to be confirmed following the Investment Strategy Review meeting.  It was also important to meet with potential new Managers as well as existing Managers who had not performed well;

·                     Members ought to give consideration to the impact on fund deficits of high global equities exposure in public sector pension schemes and whether the amount of equity investment needed to be altered.

Pension and Investment Consultants Limited (PIRC)

·                     Members agreed that the Director of Finance arrange a performance review meeting with PIRC and report back on available options; the meeting to include the Independent Adviser, Colin Robertson.

Summary Performance Dashboard for period ended 30 September 2019

·                     the Investment Dashboard showed an increase in the funding level by 14% partly due to new methodology used in the 2019 actuarial valuation;

·                     it was important that correct benchmarking data was made available to the Committee for investments in infrastructure as this impacted on reported performance;

·                     concern was expressed about underperformance by some Fund Managers to a given benchmark.  In response, Aon drew the Committee’s attention to page 30 of the agenda which set out the report from the PIRC as this showed that, in the longer term, the performance was good and close to the equity market performance;

·                     in response to a question Aon said that due to the uncertainty around Brexit and the problems facing the High Street, a 2% benchmark return for property over a year was correct;

·                     an Independent Adviser suggested the potential for use of specialist fund of funds and/or close ended funds for property investment. Aon explained that the current Fund Manager invested in certain sectors to provide a ‘vanilla’ effect and looked at opportunistic investments which provided a higher return.  Aon suggested a ‘watching brief’ and explained that the London CIV (Collective Investment Vehicle) did not currently have any available options. He agreed with the need to reconsider investments in property and examine mandates outside of the London CIV;

·                     Aon reported that the Fund did not have a problem with liquidity but agreed that wider discussion should take place during the review of the Investment Strategy;

·                     the issue of high fees also needed addressing as the fees for multi- asset management were high.

Quarterly Trigger Monitoring

·                     Aon suggested that the trigger monitoring document was considered redundant as “gilt plus” was no longer used in the actuarial valuation.   Members thought the report to be of value and agreed that it continue to be provided at future meetings.

PIRC Report

·                     an Independent Adviser explained that for periods to the end of March 2019, the Fund had performed well relative to the PIRC local authority universe.  The report from the PIRC compared all the funds and set out average performance;

·                     however, performance also needed to be measured against the fund strategic benchmark and here the performance had been disappointing. This had been attributable to manager selection more than to asset allocation.

RESOLVED:  That

(1)          subject to comments set out in the preamble above, the Work Programme for the period up to March 2020 be agreed;

(2)          the comments on the performance and investment dashboard be noted;

(3)          the comments in the preamble be noted and the Director of Finance be requested to arrange the relevant meetings.