Issue - meetings
Market and Economic Outlook by the Independent Adviser
Meeting: 20/06/2019 - Pensions Committee (Item 8)
To receive a report outlining the Market Outlook Update by the Fund Independent Adviser – To follow.
Minutes:
Colin Robertson presented his report to the Committee. The main points of the discussion maybe outlined as follows:
- "Financial markets performed strongly in Q1 2019 as central banks adopted a more accommodative monetary policy. Moderate economic growth might be expected but with policy already so simulative, policymakers have few tools at their disposal when something goes awry. Politics could prove problematic for financial markets. Equity market valuations are not unduly demanding but earnings forecasts might well be too optimistic.
- The fund has a very low exposure to bonds which might be considered to match the liabilities to some extent but this would not appear to be the ideal time to increase the fund's exposure as bond yields are extraordinarily low at present. Serious consideration should be given to investment in infrastructure now that the London CIV has a plausible infrastructure product on offer. The desired and achievable level of renewables exposure within the fund's infrastructure investment was discussed. Rebalancing the fund's equity exposure back to benchmark was raised.
- The differing opportunity sets for the various absolute return / DGF funds was noted."
RESOLVED to note the report.
Meeting: 24/07/2018 - Pensions Committee (Item 7)
7 Market and Economic Outlook by the Independent Adviser PDF 104 KB
Minutes:
Colin Robertson, Independent Advisor presented a report which detailed the views of the Independent Adviser in respect of the performance of markets for the quarter ending 30 June 2018 and the investment outlook.
The Committee was advised that the performance of markets in the latest quarter was very broadly the opposite of performance in tthe previous quarter. Equities were strong, Sterling was weak and gilt yields went down. During the 1st quarter of 2018 there were concerns regarding ‘Trade Wars’ between China and the USA and while these have not gone away, investors now perceive the situation to be more manageable and markets have recovered and become more stable.
Emerging markets have not performed well and this includes China. The changing political climate in Turkey with an ever more autocratic leader and the Argentine peso falling have contributed to above.
There were concerns that Inflation was too low (although not in the UK); however this is changing as economies continues to grow at moderate rates. There are currently several risks and one of the main concerns is international trade wars. This in particular will have an effect on ‘supply chains’; the tariffs will also have an effect on the prices of goods. Geopolitical risks remain and North Korea continues to remain a big concern. Other areas of concern are the valuation of the ‘FANGS’ technology stocks (which include Google, Amazon and Facebook) and the reversal of central bank policies of low or negative interest rates and ‘quantitative easing’. The Committee was advised that how the ‘unwinding’ is implemented will affect both equity and bond markets.
Members were advised that in these circumstances it was quite reasonable to have an Equity Protection Strategy in place. Following questions from Members, the Independent Advisor commented that the Pensions Fund was in a broadly suitable position and noted that there was a drive to reduce exposure to market movements and increase dependency on the ‘skills’ of Fund Managers. The Fund was noted as having a good ‘Asset Strategy’ for the future; it was advised that the implementation of long term planning should be undertaken at the ‘right time’ from a markets perspective.
RESOLVED
That the contents of the report be noted.