Issue - meetings
Update on Market Outlook and the Fund Investment Managers by the Independent Adviser for Quarter Ending 30th September 2017
Meeting: 29/11/2017 - Pensions Committee (Item 6)
Minutes:
Raymond Haines, the Fund’s Independent Advisor presented a report which detailed the views of the Independent Adviser on the performance of the markets and the Pension Fund investment and the Pensions Fund investment managers for the second quarter of 2017/2018.
The Committee was advised that the Global equity markets moved ahead with the MSCI World Index (+2.0 in GBP) reaching record highs despite ongoing geopolitical tensions, tighter US monetary policy and the US Federal Reserve announcing that the size of its balance sheet would be reduced. The UK market underperformed, but UK mid-cap stocks delivered better returns, this was due to the strength of sterling. European markets (+3.6% in GBP) and Emerging markets equities (+4.6 continued to perform well. Rising commodity prices also supported emerging market equities.
The previous concerns raised about risks not being priced properly has been addressed by Jonathan Ruffer who suggest that ‘the market was the most difficult market in memory and was comparable to the TMT boom in 1999. This is attributed to the cost of money namely interest rate.
There is a general consensus across the managers that the economic outlook is positive and stable, however fund managers such as Baillie Gifford have been taking some risk of the table. In the Diversified Growth Fund it is cautioning that there is a clear risk that the path of monetary policy in the developed world, particularly in the US, becomes less supportive for investment markets. The nine year long period of extraordinarily loose monetary policy since the Financial Crisis has driven asset prices higher than wished. This has pushed an increasing number of markets to a point where they are at least fully valued or expensive. An unexpected or sudden removal of stimulus would likely have a detrimental impact on sentiment and market levels. There should be more focus on protection and diversification.
Mr Haines advised the Committee that he was to retire from his position as independent Advisor and that the meeting would be his last. The Chair thanked Mr Haines for his service to the Pensions Committee during the past 15 years and commented on the clarity and contents of his reports. The Committee wished Mr Haines well in his future roles.
RESOLVED
That the contents of the report be noted.