Agenda item

Report of the Director of Finance and Assurance.

The Board received a report which summarised the matters due to be considered by the Pension Fund Committee Items at its next meeting on 9 March 2022 and invited the Board’s comments.

During the discussion that ensued the following key points were highlighted:

1)              At its next meeting on 9 March the Pension Fund Committee was due to consider the policies included at item 9 of the Board’s agenda.

2)              The Mazars External Audit Plan was not yet available and had been deferred from the March to the June Pension Fund Committee meeting instead.

3)              Referencing the December 2021 valuation of the Pension Fund at Appendix 1 to the report, the Board was informed that since December the fund’s value had dropped partly due to economic but also political factors linked to the Russian invasion of Ukraine.  The Fund was actively working with investment managers to understand fully the impact of this situation.  Although Harrow’s Pension Fund’s investments were all in pooled funds and the direct exposure to Russia was minimal, it was not practical to advocate divestment of these investments.  In addition, within the global bond fund there was a small exposure to Russia sovereign debt and the only way to divest would be to write it off.  The situation in Ukraine was being closely monitored and the Fund was working to ensure it remained complaint with sanctions as they develop.  In terms of exposure to Ukrainian companies, Members were advised that there was no specific data available, but any investments would be significantly smaller, and most would be done through the passive global equity fund.  The Fund’s exposure to the region had been gradually reduced during January and February as the conflict between Ukraine and Russian began to escalate.

4)              Considering inflation as a result of energy price hikes, the Board was informed that the interest rate rise would provide a boost for some of the Fund’s investments but may also change the value of its liabilities. Some fluctuation was therefore possible as the Fund was entering a period of uncertainty.  The Board was also advised that it was important to remain realistic, noting that many of the Harrow Fund’s liabilities extended more than 30 years into the future.  Members were reminded that the value of the Fund’s assets was currently over £1bn which placed the Fund in a strong position relative to its liabilities.

5)              Harrow’s Pension Fund Accounts for 2021 were signed off in January 2022.  This was later than originally expected and largely due to delays with the external auditors and their quality control processes for signing off the Council’s main accounts.  As a result, the timetable for presenting the Audit Plan to the Pension Fund Committee had been deferred until June.  This would allow officers to bring the report to the Governance, Audit, Risk Management and Standards (GARMS) committee as well as comply with upcoming pre-election guidance.

6)              Responding to a question on the review of emerging market equities, the Board was informed that the reason for this review was mainly due to GMO Equity Fund’s poor performance over an extended period of time.

RESOLVED:  That the report be noted.