Report of the Director of Finance and Assurance.
Members received a confidential report in relation to updates on the Investment Strategy Review and proposed some key actions to progress the review.
The report was presented and the Fund’s Investment Advisers, Aon, answered questions raised during the discussion.
The report updated progress made since the review of the equity portfolio at the previous meeting and considered a recommended approach to move the Fund’s passive equity portfolio to a suitable low carbon fund also managed by Blackrock within the London CIV passive fee arrangements.
One area of focus in the report was the review of the Fund’s Risk Control assets, and changes were recommended to the existing fixed income (bonds/gilts) managed by Blackrock, including increasing diversification through the introduction of a global bond fund managed by the London CIV.
The report also considered the Diversifying Return element of the portfolio and considered options to improve this area. However, it was felt that the Committee needed to carry out further work on the available options, and a training session by the London CIV on some aspects of this was requested.
(1) the progress made to date in respect of the realignment of the Fund’s Equity portfolio be noted.;
(2) transfer of the Fund’s passive equity holdings managed by Blackrock from the existing vehicles to their ACS Low Carbon Equity Tracker Fund be approved;
(3) the following allocation of the Fund’s Risk Control portfolio be approved:
· Multi asset credit - 10% of the Fund
· UK Corporate Bonds - 5% of the Fund
· Global Bonds - 5% of the Fund
· Index Linked Gilts - 5% of the Fund
(4) the amendment of the Fund’s Fixed Income Mandate with Blackrock be approved as follows:
· removing the 80:20 benchmark allocation between Bonds and gilts,
· reducing the existing UK Corporate Bonds holding from 11% to 5% of the Fund;
· increase the Index Linked Gilts holding from 3% to 5% of the Fund;
· transfer the Index Linked Gilts from the existing actively managed fund into a passive fund;
(5) the investment of the 5% of the Fund (arising from the above reduction in the allocation to Corporate bonds) in the LCIV global bonds fund (which is managed by PIMCO) be approved;
(6) officers (in conjunction with Aon) be authorised to continue to monitor the LCIV’s work to
· develop a UK Corporate Bond Fund and
· review the existing MAC Fund;
(7) the following allocation of the Fund’s Diversifying Return portfolio be approved:
· Property - 7.5% of the Fund
· Infrastructure - 7.5% of the Fund
· Diversified Growth Fund (DGF) - 5% of the Fund
· Source of Funds - 5% of the Fund;
(8) the retention of the “Source of Funds” allocation in the current DGF managed by Insight pending the investigation of alternative investment opportunities be approved;
(9) the arrangement of further training by the LCIV be approved, to cover the following alternative investments:
· the LCIV Renewable Infrastructure Fund,
· the London Fund,
· the LCIV Inflation Plus Fund;
(10) officers, supported as necessary by Aon, be authorised to implement the above changes to the Fund’s investments;
(11) officers and Aon be authorised to continue the dialogue with LPPI in relation to their intentions for the LaSalle mandate and, when the time is appropriate, communicate with LaSalle regarding the future intentions;
(12) officers, supported by Aon, be authorised to make the necessary consequential changes to the Fund’s Investment Strategy Statement and report those to the Committee’s next meeting.