Agenda item
TRAINING EVENTS/ Market Update
To receive a presentation for training purposes.
Minutes:
The Committee received a joint presentation from the Investment and Treasury Manager and the Independent Financial Adviser and a paper was tabled discussing objectives, reasons for asset classes and strategies. These measures combined would enable assets to be invested so that benefits could be paid as they fell due.
The following were noted:
· The span of a pension scheme was 80-100 years therefore it was necessary to ensure asset growth in order to meet the payments that would be required.
· The investment plan was required to take into account the investment strategy and contribution rates to meet the benefits that would need to be paid.
· General life expectancy was greater therefore the LGPS would be required to make greater payments to its members.
· Concerning whether mapping had been done to assess the effects of the new LGPS, the Committee was informed that the new scheme would be based on new rules but the deficit was affected by old rules which would not be affected by the implementation of the new LGPS.
· There would be a change in the accrual rate that would benefit low earners and also comprised a tiered rate of contributions.
· The present asset level was insufficient for the payments that would be required therefore it is necessary to make deficit contributions.
· Diversification of investments was the method employed to reduce overall levels of risk.
Matters concerning the nature of the investments and asset classes was discussed and the following were noted:
· Property investments tended to be in the categories of industrial property as these provided suitable returns. Investment in social housing schemes generally provided poor returns and therefore were not preferred.
· Concerning whether the LGPS invested in arms, the committee was informed that some clear guidelines on ethical investments were given to managers, but on the whole, investments were made on the basis of enhancing return. The Committee heard that the legal view concerning the nature of the investments was that pension schemes had a fiduciary duty and could not make decisions that would potentially damage returns. It was noted also that managers have an ethical position on the investments.
· Decisions on what the investment priorities would be were determined by the Investment Panel by interviewing investment managers. Additionally Tower Hamlets was a Member of the London Authorities Pension Fund Forum a body which discusses and researches pensions’ issues and ethical matters. It was noted that the Pensions Committee of the previous municipal year had made a statement to managers that unethical investments should be discouraged
· The allocation of investments across the classes reflected general local government investment trends and diversification.
· Concerning whether the fund could be diversified into different types of equities or bonds, the Committee was informed that the allocation was diversified into worldwide stocks and global equities. Additionally it was noted that there was a rebalancing mandate between equities and bonds
· Bond yield were presently very low
· The investment manager structure was a mix of passive and active managers
· Diversified funds contained a range of elements and provided a diversified pool of investments. It was noted that diversified funds contained a range of elements and provided a diversified pool of investments. It was noted that diversified funds were presently very defensive as some market adversity was anticipated in the near future.
· Tracker investments track the stock markets both up and down and therefore it was necessary to balance active and passive investments.
The Chair requested that a list indicating where funds were invested be brought to a future meeting.
Action: Bola Tobun
RESOLVED
That the presentation and discussion be noted.