Minutes:
Prior to the consideration of this item, the Committee resolved to move into a virtual private session for the discussion and decision-making relating to this item.
The Committee received a confidential report and accompanying appendices, updating Members on the Pension Fund’s Investment Strategy Review and proposing key actions to progress the review.
The report focussed on the fund’s equity investments, which had a strategic benchmark of 50% of the fund’s assets. The equity portfolio was allocated to a number of managers with different investment styles and geographical market exposures as this diversification helped in managing investment risk.
In the discussion which followed, Members had an opportunity to comment on the report and raised a number of questions relating to the Fund’s equity portfolio and proposed changes to its management.
It was noted that value investing has consistently yielded poor returns since 2008, and the fund’s value style manager, Oldfield, had performed poorly within the “universe” of value managers. It was therefore decided to work towards replacing this with an investment in the London CIV’s Sustainable Equity Fund (managed by RBC) which would improve the fund’s positioning in regard to the Council’s stated policy on climate change, while maintaining an appropriate diversification of style from the other equity managers and improving risk adjusted return prospects.
It was also noted that there had been some concerns about Longview’s performance and changes in their key personnel, but it was nevertheless appropriate to retain Longview and to continue to monitor them closely.
To evolve the fund’s passive equity portfolio, and consider its position in the context of the Council’s policy on climate change, it was agreed that officers and Aon would explore the possible low carbon passive options available within the London CIV’s arrangements with the current passive manager, Blackrock.
Taking into account the uncertainties in global economies, it was considered appropriate to retain the current arrangements for hedging against the risk of currency fluctuations.
Having noted their importance to the Fund’s investment strategy, it was agreed that an item to review equity holdings be added as a regular item to the agenda for future Committee meetings.
The Committee also noted the London CIV’s proposals to review the MAC Fund, and some concerns regarding its property manager, LaSalle, and accordingly agreed that the risk control and diversifying return assets would be reviewed at the next meeting.
RESOLVED: That
(1) the Redemption of the Fund’s equity investments held with Oldfield be approved and officers authorised to progress the matter further;
(2) the Investment of the proceeds from this redemption in the London CIV Sustainable Equity Fund be approved and officers authorised to progress the matter further;
(3) the current ongoing concerns shared by Aon and the London CIV in regard to Longview and that officers would continue to liaise with Aon in order to monitor this position, be noted;
(4) the retention of the currency hedging mandate with Record and closer engagement to improve the Fund’s understanding of the managers’ activity, be approved;
(5) that based upon the position at 30 September 2020, no rebalancing was required, but officers, in conjunction with Aon, be authorised to consider and take action should the 31 October 2020 position indicate that this be appropriate;
(6) officers and Aon be authorised to explore further with Blackrock the Low Carbon Passive equity options available within the London CIV’s passive equity fee arrangements;
(7) officers and Aon be authorised to liaise further with LPPI, Berkshire and other investors in the LaSalle Property Fund of Funds to determine possible options for its future;
(8) that consideration of the Fund’s diversifying return and risk control assets at the next stage of the Investment Strategy Review, be agreed.