The Committee noted the report of Neville Murton (interim corporate director of resources) and Miriam Adams (Interim Pensions Manager), on the Investment and Fund Managers Performance Review for Quarter Ending September 2019.

The Independent Advisor highlighted key points from his quarterly commentary. These included:

·         Equity markets have gone up by 23% (S&P 500) and 27% (Nasdaq) so although equity markets were vulnerable the same could be said of other asset classes such as bond markets which appear even less attractive.

·         The funds equity weighting should be no greater than the strategic equity benchmark, funds with a cash plus return target such as diversified growth funds can provide a suitable home until other asset classes become more attractive. 

·         Infrastructure was recommended as an asset class to invest in without delay.

·         Baillie Gifford had performed poorly this quarter and was underperforming by its benchmark by 1.5% over the last year and has contined to underperform. This could be attributed to Ballie Giffords philosophy for managing the fund which focuses on longer term themes such as technology which results in holding greater growth stocks as opposed to value stocks.  This could be a case of waiting out the period of underperformance in the belief that longer term returns would be good, as they have been in the past.

·         It should be noted that the London CIV do not offer a ‘value’ fund and that the LCIV Sustainable Equity Fund has some similarities with the Ballie Gifford equity fund.

·         The London CIV appeared to be in crisis and was facing difficulties retaining or attracting suitable staff. The chief investment officer had resigned within weeks of joining the CIV and one of two senior managers was due to depart at the end of 2019. There were also concerns about the quality of monitoring reports which showed a limited ability in being able to look beyond what is being told by managers.

The Committee expressed concern at the report that the London CIV was experiencing a management crisis. The independent advisor advised against any new ventures with the CIV until the management issues had resolved. After meeting with the CIV he reported that they said they would work out the issues within six months however he advised that it should be noted that the CIV was on a ‘watch list’ due to internal management issues.

The Chair reported that previously the CIV advised that they had a limited demand for and supply of green investment funds but if there was demand they would be able to start research in the area. Since then she had met with Councillor Mark Engleby at Lewisham Council and they had formed a group of councils that would be interested in a green fund. Councillors in the group had received verbal confirmation from CIV officers that they were willing to look into starting a green option. However, given the independent advisors report, the Chair said there appeared to be a mixed signal on the London CIV’s capability to manage.

It was advised that it would be best to formally contact the CIV with regards to starting a green fund and await a response. The Chair and Senior Officers to draft a letter to the CIV with regard to an update on a green fund.

ACTION:

1.    The for Chair and Senior Officers to write to the Chair of the CIV informing them a group of councils are interested in a green fund and a request for options to be presented in the next year.

The Committee RESOLVED to:

1.    Note the content of the report.

2.    Note the independent advisors quarterly commentary report.

3.    Note the PIRC reports

4.    Note the detailed fund performance by Mercer