Agenda item
Presentation: Insight on Performance & Strategy of BNY Mellon ARB Fund by Andrew Wickham, 15 Minutes
- Meeting of Pensions Committee, Wednesday, 13th March, 2019 6.30 p.m. (Item 5.2)
- View the background to item 5.2
Minutes:
The Committee considered the Insight presentation in detail and noted:
- The market value for the Fund’s holding with Insight as at the end of December 2018 was £47 million. The Fund started investing with Insight in 2016. Insight’s performance since inception has been disappointing relative to the return target, in particular, due to a challenging 2018. Insight’s presenters assured that the investment management team is experienced and understand the performance expectations. They take the performance of the fund seriously.
Insight then responded to questions by the Committee about the underperformance of the fund:
- There were no changes in management or level of risks taken, or in the approach in which assets are managed. 2018 was just a bad year, in particular due to the negative impact of country decision-making. Page 11 of the presentation addresses the areas that suffered the most in 2018.
- Insight was expecting European markets to perform worse than other markets; however what actually happened was that the European markets performed relatively well. Insight had expected European bonds to underperform other markets, so this impacted on a number of their investment decisions. Insight provided a general overview of their investment positioning in 2018 and discussed what themes had worked out well and those that had not.
- In response to assuring the Committee of the potential for performance improvement, Insight highlighted the following:
- Insight had realised that they need to increase research and expertise into the Chinese market, so they are better able to understand how the activity in that market feeds into the rest of the world. To this end, Insight is hiring an expert specifically on the Chinese market to the broader investment process and to help Insight understand the impact better;
- Insight takes a balance of long-term versus just short-term views. Insight does not want to cut positions that it firmly believes will make their clients’ money in the long run;
- Insight still believes that the European market does not look like it will perform well;
- It is looking at opportunities in emerging markets; and
- Portfolio managers are looking for good ideas for better performance of the fund;
- Insight is seeking good ideas whilst maintaining positions that are earning money. Portfolio managers are looking to invest in new trades, invest in Canada and buying other UK companies.
- In response to a query about which emerging markets Insight is investing in:
- Emerging markets do look very attractive right now. Individual stories such as Brazil which is a market friendly market, Columbia and Russia. They are not looking at the Asian markets as they do not appear to be good value for money. Their preference is countries that are stable or improving. Emerging markets are a large portion of the fund.
Action:
Committee to look at Insight’s presentation in detail and to consider making a decision on it’s the future role in the portfolio.