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
• Draft work programme on which the Committee’s comments and agreement was requested.
• the investment and management performance dashboard report summarising key fund performance and risk indicators and PIRC Performance Indicators
• Fund performance to 30 September 2022
• Update on Pension Board.
The following amendments were made to the report and appendices:
• On page 9 of the agenda, Paragraph 16, 5th bullet point the Investment in Blackrock Sterling Liquidity (cash) fund was amended from £50 to £5m
• Appendix 1 on page 15 of the agenda, the LCIV Longview under 12 months was amended from -7 to +3.5.
The Draft Work Programme
Members commented as follows:
Members requested an update on agreement at the previous meeting that new Members would benefit from training on risk and asset management.
An officer explained that arrangements had been made for Councillors David Ashton (Chair) and Suresh (Vice-Chair) to attend trainings and briefings organised by the following groups:
• London Pension Fund Officers Group, Westminster Council – London wide Member training
• A briefing by LCIV London - briefing for new Councillors on how CIV works
After these training sessions, officers will liaise with relevant new Members of the committee to schedule further training. A Member advised that old Members could also benefit from the London CIV training. It was agreed that invitations should be extended to old members of the committee to attend the LCIV briefing.
The investment and management performance dashboard
Members commented as follows:
Members asked if the timing of the decision of the rebalancing agreed by the committee and ensuing transactions listed in paragraph 16 of the report had helped.
The representative AON explained that recent developments in the gilt and fixed income markets had made them more attractive to investors in corporate bonds and depending on the date of the investment the real yields had been attractive, though they had since fallen back to levels before the mini budget. Fixed income as a class had become more attractive recently as yields had risen. It was a good time to invest in them.
A member asked for clarification on the fall in the value of assets and the mitigating transactions as detailed in paragraph 14 of the report.
An officer explained that the fund hedges 50 percent of its exposure to certain non-sterling currencies. The total value of currencies hedged was about 200 million. At the end of September due to the timing of the settlements, coming right in the middle of the turmoil, following the abortive mini budget from the former Chancellor, the amounts that the Council had to settle increased by 50 percent within a week to almost 20 million. In consultation with AON, it was agreed that money should be withdrawn from gains made from equities held in those currencies to settle the claim in October 2022.
A member commented that the funding level at 116 percent was a temporary improvement from liabilities and asked if any further changes to the funding level was anticipated.
The representative from Hyman Robertson explained that the investments were in risky markets and as a result, funding levels may go down but there were no guarantees. The funding levels had not changed in the last 30-40 days and had remained at 1 16-120 percent. Funding levels would be monitored in the long term and kept above 100 for a long time.
A member questioned if the Council’s liabilities had been affected by the reduced interest rate.
The representative from Hyman Robertson responded inflation expectations over a long term were coming down and all the benefits linked to inflation were lowering the Council’s liabilities.
(1) the performance and investment dashboard report be considered be noted.
(2) the draft work programme for the remainder of 2022-23 be approved.