Issue - meetings
PRESENTATION FROM PIRC ON LOCAL AUTHORITY INVESTMENTS LEAGUE TABLE
Meeting: 26/11/2018 - Pension Board (Item 7)
7 PRESENTATION FROM PIRC - LOCAL AUTHORITY PENSION PERFORMANCE ANALYTICS ANNUAL REVIEW PDF 557 KB
The Board will receive a presentation from PIRC– Local Authority Pension Performance Analytics Annual Review.
Minutes:
The Board received a presentation from Pensions & Investment Research Consultants (PIRC) on the Pension Performance Annual Review.
Board Members received the following in response to their questions:
- It was difficult to generalise why there has been a move from equity towards diversification.
- The LGPS was performing well as a higher risk fund.
- The Fund had equity protection which reduced the risk of holding equities.
- With regard to the Risk and Return Last Five Years slide, Tower Hamlets Council was placed on the top half along the risk line.
- With regard to the Fund Structures slide, the blue arrow showed the number of managers had increased from 5 to 13. The figures 5, 7 and 13 represented the number of fund managers. The percentage numbers represented the proportion which is actively managed.
- With regard to the Top and Bottom Performers – Ten Years slide, the yellow dots represented underperforming funds and the red dots represented outperforming funds.
- It was noted that Bromley was doing well on the league tables and advisors suggested this may be due to a larger allocation on equities.
- It was clarified that the performance value dots on the diagram represented the whole of the UK not just the London boroughs. They represented the 63 funds covered by PIRC. There are 89 local authorities joined to the Fund in England and Wales. There are 101 authorities joined to the Fund in the UK.
- Members requested a clarification on point two of the What Can Be Learnt slide. It was clarified that Tower Hamlets had more active managers because it had invested in alternatives. The advisor explained that a wider range of investments tended to result in the need for additional specialist managers. It was noted that Tower Hamlets had two absolute return funds and two DGF (Diversified Growth Fund) managers. The Chair understood this to mean that the Council should be mindful to not lose manager value by investing in a pool with too many managers as there may be a risk of in effect moving towards passive management.
- It was clarified that the data presented on the table in the Tower Hamlets Fund Structure included funds which are not in the pool, namely GSAM, Insight and Schroders. It was noted that L&G was separate but the Council was paying the London CIV fees for managing the relationship with L&G and this would count towards the pooling arrangement.
- It was reported that the Fund had done well and was performing well relative to the benchmark. Significantly over the past year the Fund outperformed the average by 1.5%, this ranked it in the 7th percentile out of the 63 local authorities covered by PIRC and about the 4th or 5th ranked fund. It was noted that Baillie Gifford’s success contributed to this result.
- It was concluded that the Fund had outperformed over 1, 3 and 5 years and performed broadly in line with benchmarks over the long term which was a positive outcome.
ACTION: ... view the full minutes text for item 7
Meeting: 16/10/2017 - Pension Board (Item 7)
7 PRESENTATION FROM PIRC ON LOCAL AUTHORITY INVESTMENTS LEAGUE TABLE PDF 717 KB
Minutes:
The Board received a presentation from David Cullinan of Pensions & Investment Research Consultants Ltd (PIRC), on the Annual Performance Review of the Tower Hamlets Pension Fund. PIRC is an independent corporate governance and shareholder advisory consultancy that has over 30 years’ experience in their field and currently provides a service to 51 Funds which have a market value of over £160 Billion. PIRC has a diverse client base which comprises of large pensions funds and asset managers, trade unions and other responsible investors. The Committee during a question and answer session: Noted
• There were excellent returns for funds’ asset between 2016 / 2017. All major asset classes delivered positive returns; this return was driven by strong equity performance. The above would have led to Funding levels being improved. The alternative asset performance is healthy but mixed.
• There was a notable move from traditional equities and bonds.
• For Equities, all markets delivered significant doubly digit returns; however the domestic equities were weaker when compared to their overseas counterparts. This was bolstered by the weakness of sterling. Equities have driven the excellent long term performance of the LGPS.
• Members commented on the relationship between the value of sterling and performance of equites and questioned whether any loses had occurred with Funds that had employed ‘hedging’. The Board was advised that ‘hedging’ which had occurred before Brexit would have encountered losses and reminded that Sterling had picked up since the Referendum. The Board was advised that currency hedging was good opportunity to ‘lock funds’ and that ‘Active Currency’ had risen in popularity.
• Bonds returns have been positive in particular those which where index linked; Absolute return strategies lagged by some margin.
• Performance of Alternatives were strong but mixed; Private equity in aggregate performed best and diversified growth strategies outperformed benchmarks but lagged other assets.
• Only six of the last thirty years have produced negative returns; these periods are often followed by strong growth. The thirty year return averages close to 9% p.a. this is a real return of 6% p.a.
• Members commented about the long term performance and noted there had been a long sustained period of positive returns and questioned whether this will remain. There are number of factors which may have an effect on the future returns; these include US Election, Brexit, domestic market and changes to interest rates.
• Long term alternative asset performance benefited the large funds who were early investors in private equity.
• Alternative asset exposure has increased. There has been changes at asset class level which include; domestic to global equity, Gilt to alternative credit sources and Hedge funds to more transparent alternative strategies. Members were advised that two thirds of Funds have moved from domestic to international.
• Member commented that there were little changes with Equity and was advised that a large portion of this class was held in cash. During the past ten to fifteenth years there was a lack of complexity in this class; ... view the full minutes text for item 7
Meeting: 18/09/2017 - Pension Board (Item 7.)
PRESENTATION FROM PIRC ON LOCAL AUTHORITY INVESTMENTS LEAGUE TABLE