Items
No. |
Item |
1. |
DECLARATIONS OF DISCLOSABLE PECUNIARY INTEREST PDF 67 KB
To note
any declarations of interest made by Members, including those
restricting Members from voting on the questions detailed in
Section 106 of the Local Government Finance Act, 1992. See attached note from
the Monitoring Officer.
Minutes:
No declarations of disclosable
pencuniary interest were received.
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2. |
PETITIONS
To receive any petitions
relating to matters for which the Committee is
responsible.
Minutes:
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3. |
MINUTES OF THE PREVIOUS MEETING PDF 139 KB
To confirm as a correct record
the minutes of the meeting of the Pensions Committee held on 18
September 2018.
Minutes:
The
minutes of the meeting held on 18th September, 2018 were
agreed as a correct record. Copy to
sign.
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4. |
SUBMISSIONS / REFERRALS FROM PENSION BOARD
Minutes:
The
Committee received an update from John Jones, Chair of the Pensions
Board.
The
Committee noted that:
- The
Pensions Board had met on 26th November 2018;
- The
vacancies on the Board have been filled and the Board is now back
to a full complement of 7 members: 3 employee and 3 employer
representatives with John Jones as Independent Chair;
- The
Board received 2 presentations at the meeting: the first from PIRC
reviewing the performance of the Tower Hamlets Fund and the second
from Colin Robertson on the Fund’s Investment Strategy and
Divestment from Fossil Fuels;
- The
PIRC presentation looked at the investment performance from 63
Local authority Funds in England, Wales and Scotland in terms of
overall results, identified trends in asset classes and risk
return. The Funds that have performed best tended to have less
complex structures, hold a higher percentage in equities and have
longer term relationships with managers. It was noted that Tower
Hamlets meets these criteria. The Fund has performed very well in
2017/18 and ahead of its peers and ahead of inflation over all
timeframes. A key factor in recent good performance has been the
contribution from Baillie Gifford that offset weaker performance
elsewhere. The Board agreed that the Committee should consider
receiving the same presentation at a future meeting;
- Colin
Robertson made a very useful presentation on the Funds Investment
Strategy covering liability matching, return seeking and other
risks. He went on to outline the context and approach to
disinvestment from fossil fuels based on the report you have on the
agenda today. This included discussion on the role of the London
CIV and noting the relatively low carbon of the Tower Hamlets Fund
compared to other similar Funds. The Board is supportive of the
approach as set out in the report on the agenda today.
- The
Board discussed the latest report on Voting and Engagement asked
for more information in future from LAPFF and the CIV on the effect
of their engagement with companies as much of it is described as
dialogue.
- The
Board also had a preliminary discussion on next year’s work
plan. This also included feedback on the recent training sessions
held for Board and Committee members. The unanimous view of those
who attended was that the sessions had been very good and further
training sessions should be arranged in 2019;
- It is
very important that Board and Committee members can evidence
effective training and development as this is an area of interest
for the Pensions Regulator; and
- The
monitoring report on Pensions administration was not available at
the meeting so it could not be discussed on this
occasion.
- Finally, it was noted that the issue of non-representation at
the London CIV shareholder committee had been raised and given that
Tower Hamlets has the largest percentage of pooled assets of all
the London Boroughs. The Board made a recommendation that this
issue should be raised by the Chair of pensions committee with the
board of LCIV and the LCIV Shareholder Committee. ...
view the full minutes text for item 4.
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5. |
PRESENTATION AND TRAINING
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5.1 |
Presentation - Renewable Energy Infrastructure Training by Temporis Capital Ltd
Minutes:
The
Committee received a presentation from Andres Senouf and Matthew
Ridley from the Temporis Equity Infrastructure team which manages a
number of private and public renewable energy portfolios across
onshore wind, hydro, biomass and solar.
The
Committee noted:
- The
modern world depends on food, energy and water. The world is facing
crises in the availability of these vital natural resources.
Temporis' investment philosophy is that the global economy is
facing huge structural change across these fundamental sectors.
These dislocations are creating excellent conditions for
implementing an active investment strategy. Disruptive technology
and government interference are creating uncertainty and volatility
in global equity prices leading to undiscovered investment
opportunities. Climate change, shifting demographics and the
pursuit of food-energy-water security present opportunities as well
as challenges. Temporis Capital combines financial and sector
expertise to take advantage of these opportunities;
- Temporis have a team of over thirty investment professionals
with combined experience of over 170 years in renewables and over
400 years in financial services. Temporis feel that their
investment and operational policies enable them to deliver
consistent returns for our clients. Temporis see challenges and
uncertainty as an opportunity. Their approach it was noted was
manage and mitigate it carefully such risks;
- Temporis work to build mutually beneficial relationships with
clients and counterparties leads to long term working relationships
that they see as core to their philosophy and strengthen their
success as a business.
- Cohesive and High Performance Team.
The questions and comments from Members on the report
may be summarised as follows
The
Committee noted that:
- One of
the most important economic benefits of wind power is that it
reduces the exposure of fuel price volatility;
- Whilst
offshore wind capacity is more expensive than onshore wind there is
an expected benefit of higher wind speeds and the lower visual
impact of the larger turbines;
- Wind
power is one of the oldest-exploited energy sources and today is
considered to be the most seasoned and efficient energy of all
renewable energies provided by companies such as Siemens a trusted
technology partner;
- There
is benefit in the amalgamation of several wind farms than
investment in the development of a larger new wind
farm;
- Temporis are one of the few companies that invest across the
supply chain;
- Whilst
Temporis will outsource element of the development and running of
schemes they have a skilled Asset Management Team who maintain an
oversight of the scheme; and
- Whilst
solar and wind farms provide a valuable contribution to the
National Grid on a daily basis there can be fluctuations. However,
there is the ability to use gas/nuclear to address such
fluctuations.
Andres
Senouf and Matthew Ridley were thanked for their
presentation.
The Chair Moved and it
was:-
RESOLVED
To note the Presentation.
The
Chair gave a quick update on the Infrastructure training he
attended, which was organised by LGA (Local Government Association)
& SAB (Scheme Advisory Board):
- Pension funds are trying to diversify their portfolios and to
enhance their long-term asset-liability management with
infrastructure assets.
- There
is an appetite for ...
view the full minutes text for item 5.1
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5.2 |
Presentation - LCIV Governance Update by LCIV
Minutes:
The
Committee received a Governance Update from Kevin Cullen regarding
the London CIV Investment Strategy that covered a number of issues
including the Pooling Landscape; Governance and Oversight;
Divestment from Fossil Fuels; Fund range; Responsible investment;
and the Tower Hamlets Portfolio.
The
questions and comments from Members on the presentation may be
summarised as follows
The
Committee noted:
- That
London as part of the CIV update over 45% of London’s assets
are now pooled; Four new sub-funds launched in 2018; 14 active
sub-funds;
- That
the CIV are offering training with StepStone on infrastructure to
meet the needs of institutional investors at any stage of their
investment program;
- That
the CIV Board has collective responsibility and it comprises three
executive and seven independent non-executive directors plus one
independent chair;
- That
the CIV Board must act in interest of all shareholders;
- External independent oversight is provided by the FCA (Approved
persons, permissions for business, approval of prospectus);
Independent oversight of assets to protect investors’
interests is provided by the Depositary and Auditing of LCIV
(company) and ACS (pooling vehicle) by external
auditors;
- Government oversight on the progress against pooling criteria
comes from the Ministry of Housing, Communities and Local
Government;
- With
regard to the commitment to responsible investment (i) the LCIV has
established a responsible investment policy; (ii) the LCIV has
become a signatory to the UN Principles for Responsible Investment
(iii) the LCIV is a signatory of the UK Stewardship Code; and (iv)
LCIV Managers are required to have Responsible Investment
policies
- The
key statistics relating to the LCIV Global Alpha Growth Fund
portfolio, and the LCIV Global Alpha Growth Fund’s
performance since inception on 11/04/2016;
- That
the LCIV Diversified Growth Fund’s objective is to provide a
minimum return of 3.5% over cash, with low volatility. The fund
invests in a broad array of asset classes and their respective
weightings will be determined according to the team’s
conviction in each of them over the medium term. Derivatives will
be used to help dampen the volatility of the fund and hedge out
some of the unwanted exposures in the fund; and
- The
portfolio exposures in LCIV Diversified Growth Fund by percentage
and the exposure at the end of both Q2 2018 and Q3
2018.
Kevin
Cullen was thanked for his presentation.
The Chair Moved and it
was:-
RESOLVED
To note
the Presentation
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6. |
REPORTS FOR CONSIDERATION
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6.1 |
Quarterly Investment Performance Review PDF 227 KB
Additional documents:
Minutes:
6.1
Quarterly Investment
Performance Review
Bola
Tobun, Investment and Treasury Manager presented the Quarterly
Investment Performance Review.
- The
Fund underperformed its benchmark return of 3.24% by 0.84% for the
quarter.
- Five
mandates matched or achieved returns above the set
benchmark. The five that did not
achieve the benchmarks were the mandates with LCIV BG (DGF), LCIV
BG (GE), Insight and GSAM bond
portfolios.
- The
Fund Valuation of £1.560bn, a £35m increase over the
quarter. For the twelve months to September 2018, the Fund returned
7.81% marginally underperforming the benchmark of 7.88%; the Fund
is behind its benchmark by 0.08%.
- Four
mandates underperformed their respective benchmark. The mandates that underperformed their respective
benchmarks were LCIV RF lagged behind by 1.66%, LCIV BG (DGF)
lagged behind by 2.45%, GSAM lagged behind by 6.34% and Insight by
7.82%.
- The
three year return for the Fund was 12.45%, above its benchmark
return by 0.54% for that period. Over
the five years, the Fund posted a return of 9.42% outperforming the
benchmark return of 9.19% by 0.23%.
- The
Fund remains in line with its long term strategic equity asset
allocation and the distribution of the Fund’s assets amongst
the different asset classes is broadly in line with the strategic
benchmark weight.
The
questions and comments from Members on the report may be summarised
as follows
The
Committee:
- Noted
performances of Goldman’s and Insight were bad and there is a
need to meet with them.
- Considered inviting Goldman and Insight to the next meeting to
discuss their current performances, or for Officers to review their
performances and report back to the Committee.
The Chair Moved and it
was:-
RESOLVED
- To
note the report; and
- For
officers to review Goldman’s and Insight performances and
report back to the committee with recommendation/s.
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6.2 |
Market Outlook Update by the Fund Independent Adviser PDF 116 KB
Minutes:
Colin
Robertson, Independent Adviser presented the
Market Outlook Update in respect of the
performance of the markets and the Pension Fund investment managers
for the first quarter of 2018/19. The
questions and comments from Members on the report may be summarised
as follows
The
Committee noted that:
- Gilt
and bond exposure very low in context of liabilities but acceptable
given central bank manipulation and very low level of
yields.
- Absolute return / DGF holdings somewhat temporary, would not hold these assets in the long
term at the current level of exposure.
- Fund
has more inflation protection than interest rate
protection
The Chair Moved and it
was:-
RESOLVED
To note the Update Report.
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6.3 |
Responsible Investment and ESG Considerations PDF 391 KB
Additional documents:
Minutes:
Bola
Tobun, Investment & Treasury Manager to present
the report that outlined the Funds current
position on responsible investments, and discusses the
Environmental, Social and Governance (ESG) issues currently
dominating Pension Fund investment debate. The report also
considered what other LGPS funds are doing and recommends
alternative ways in which the London Borough of Tower Hamlets
Pension Fund (LBTHPF) can further promote the integration of ESG
issues into its investment decision making. Amendments made to
recommendations VI and deletion of recommendation VII as LCIV not
currently considering or have investment in fossil fuel fund on
their platform.
In
addition, the following recommendations and amended recommendations
were noted:
- Note
the LBTHPF regulatory obligations in respect of responsible
investments (para. 3.6);
- Note
the LBTHPF’s current responsible investment stance (para.
3.8);
- Maintain the Fund’s current engagement activities which
the Local Authority Pension Fund Forum (LAPFF) carries out on
behalf of the Fund (para. 3.13 - 3.14);
- Note
the outcome of carbon foot print analysis as at 31st March 2018 as
set out in paragraph 3.33; and
- consider a policy (recommendations as set out in paragraph 3.43)
regarding the LBTH Pension Fund’s approach to fossil fuel
investment with a view to incorporating this within the
Fund’s Investment Strategy Statement.
The
questions and comments from Members on the main body of the report
may be summarised as follows
The
Committee:
- Noted
that the overall Equity portfolio exhibits approximately 38% lower
carbon exposure relative to each Equity mandate held by the Fund
contributes to carbon efficiency of the Fund as follows a) Baillie
Gifford Global Equities. 40% reduction in Carbon exposure relative
to the MSCI ACWI benchmark; b) L&G Passive Global Equities:
This passive equity fund demonstrates a very similar carbon
intensity to its benchmark; and c) L&G Passive Low Carbon
Global Equities: This passive equity fund demonstrates a very
similar carbon intensity to its benchmark but has a 72% reduction
in carbon exposure;
- Agreed
that there was a need for more training and further analysis as to
what is appropriate for the Fund;
- Wished
going forward to undertake a transition to
“fossil fuel free” from “low carbon” and to
see examples from other Funds on how they had transited to
“fossil fuel free”;
- Noted
that there is an increasing demand by members of the London
Collective Investment Vehicle for a reduction in fossil fuel
investment and a reduction in the Carbon Footprint;
- Considered that careful consideration was needed regarding the
priorities on investment with a balance between the benefits of
reducing the Funds Carbon footprint without a significant reduction
in performance;
- Indicted that it would wish to receive a report providing a
clearer picture of the costs and benefits of moving towards
“fossil fuel free” investment;
and
- Wanted
to receive the necessary training to provide the Members with the
require skill sets to manage the towards “fossil fuel free”
investment.
The Chair Moved and it
was:-
RESOLVED
To
-
Note the LBTHPF regulatory obligations in respect of
responsible investments (para. 3.6);
-
Note the LBTHPF’s ...
view the full minutes text for item 6.3
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6.4 |
Pensions Administration Performance targets and indicators PDF 85 KB
Additional documents:
Minutes:
Tim
Dean, Pensions Team Leader presented a report that report covered
the activities and performance of the Pensions administration
team.
The
Committee noted that
- There
have been no changes to the staffing situation since the last
committee report in July 2018;
- Overall, in the second quarter of 2018/19, the Pensions team has
completed 87.91% of its workload in line with the services
standards measured by the performance indicators. Noted that this
is an improvement from the 85.66% completed in line with service
standards during the 2017/18 year, but down from the first quarter
figure of 89.43%;
- A
change to the SCAPE discount rate, which is used to set employer
contribution rate in unfunded public service pension schemes and
actuarial factors across all public service pension schemes, means
that transfer payments, both in and out, have been put on hold
since 29th October 2918. New transfer factors are expected by
mid-December;
- New
regulations to correct the unintended error in the LGPS (Amendment)
2018 Regulations have been consulted on. The new regulations, if
approved, would allow deferred members who left prior to 1st April
1998, to access their benefits from age 55 without the consent of
their former employer;
The Chair Moved and it
was:-
RESOLVED
To
- Note
the information provided in this report in respect of the scheme
administration and the performance metrics;
- Note
that payment of member’s transfers has current been
suspended; and
- Receive details of the backlog of data in the next
report.
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6.5 |
Update on GAD Section 13 Valuation Results based on 31st March 2016 Triennial Valuation of Pension Schemes PDF 294 KB
Additional documents:
Minutes:
The
Chair to invite Bola Tobun, Investments and Treasury Manager to
present the report that provided Members with
information on the Section 13 analysis completed by the Government
Actuary’s Department (GAD) using the 2016
valuations.
The
Committee noted that:
- The
LGPS is a funded scheme and periodic assessments are needed to
ensure the fund has sufficient assets to meet its liabilities.
Employer contribution rates may change depending on the results of
valuations. Scheme regulations set out when valuations are to be
carried out;
- Each
LGPS pension fund is required to appoint its own fund actuary, who
carries out the fund’s valuation. The fund actuary uses a
number of assumptions to value the liabilities of the fund.
Liabilities are split between those that relate to the past (the
past service cost), and those that relate to the future (the future
service cost). The results of the valuation may lead to changes in
employer contribution rates for both future and past service
costs.
- The
report is based on the actuarial valuations of the 91 funds, with
data provided by the funds and their actuaries, and a significant
engagement exercise with affected funds. GAD is committed to
preparing a section 13 report that makes practical recommendations
to advance the reporting aims. Also expecting that their approach
to section 13 will continue to evolve to reflect ever-changing
circumstances and feedback received.
The Chair Moved and it
was:-
RESOLVED
To note the report.
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7. |
TRAINING EVENTS
Minutes:
Members
were advised that they will be receiving training on Infrastructure
at the next Committee.
A list
of LGA Training for Pensions Committee Members will be circulated
to Members. Members were asked to inform Bola Tobun if they wish to
attend any of the training events.
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8. |
ANY OTHER BUSINESS CONSIDERED TO BE URGENT
Minutes:
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