Agenda item
MINUTES OF THE PREVIOUS MEETING(S)
To confirm as a correct record the minutes of the meeting of the Committee held on 28th November 2019 and 18th February 2020.
Minutes:
The minutes of the meeting held on the 28th November 2019 and 18th February 2020 were AGREED subject to the following amendments;
Minutes of 28th November 2019
Mr Colin Robertson, Independent Adviser to the Pensions Committee requested several changes be made to the minutes of the 28th November 2019.
In relation to item 5.3 “Report on Fund Liquidity” the amendments related to the body of the text, to say the following:
5.3 Report on Fund Liquidity
The Committee received the report of Miriam Adams (Interim Pension and Investment Manager) on Fund Liquidity.
The Committee were in agreement to sell part of the Baillie Gifford equity holding in order to reduce the exposure to the level of the strategic benchmark and so reduce the fund’s risk profile. The Committee instructed finance officers to contact the London CIV on their behalf to initiate the process.
While this would produce cash in the short term, how cash could be produced on an ongoing basis was also discussed. There was a suggestion that the fund could benefit in the medium / long term if the fund’s investment managers paid out the dividends / income from the portfolios they managed rather than retaining the dividends / income in the portfolios. It was agreed that in the first instance it would be best to take income from the CQS MAC and Schroders property portfolios. Officers were asked to contact the LCIV to find out if there was an option to do this.
The Committee agreed that the cash flow appendix on page 97 of the pack was useful and requested the document be presented to the Committee on an annual basis including figures on income received.
ACTIONS:
1. Senior officers to contact the London CIV to sell Baillie Gifford.
2. Senior officers to contact the London CIV to find out if the CQS fund could pay out dividends.
3. Officers to add Pension Fund Cash Flow Forecast to the committee forward plan to be reviewed on an annual basis.
RESOLVED:
1. To note the estimated cash flow deficit of £13m from operational activities (Appendix A).
2. Approve the recall of £2m dividend and rental from Schroders into the LBTH Pension Fund bank account to help meet the cost of in-year liabilities.
3. To approve the sale of Ballie Gifford equity investments amounting to £11m.
In relation to item 5.5 “The investment Consultancy and Fiduciary Management Market Investigation Order 2019”, Mr Robertson proposed the third point under the actions the Committee resolved should read:
The Committee RESOLVED:
3. Note the legal requirement for trustees of occupational pension schemes (including the LGPS) to set objectives comes into effect from 10 December 2019
And lastly, Mr Robertson proposed the minute relating to item 7.1 “Investment and Fund Managers Performance Review for Quarter End September 2019”, the body of the text be amended, to say the following:
7.1 Investment and Fund Managers Performance Review for Quarter End September 2019
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) in 2019 so equity markets are vulnerable against a background with plenty of scope for bad news. The problem is that it can be argued that other asset classes notably bond markets appear even less attractive.
· The fund’s 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.
· The Baillie Gifford equity fund had performed poorly this quarter, underperforming its benchmark by 1.5% over the last year, and had continued to underperform. This could be attributed to Ballie Gifford’s philosophy for managing the fund which focuses on longer term themes such as disruptive technology which results in holding growth stocks as opposed to value stocks. The manager cannot be expected to suddenly change their investment style so it 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.
· Resourcing at the London CIV appeared to be in crisis and it 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 manager researchers was due to depart at the end of 2019. There were also concerns about the quality of monitoring reports which showed a limited ability to look beyond what they are being told by managers.
The Committee expressed concern at the report that the London CIV was experiencing a resources crisis. The independent advisor advised against new ventures with the CIV until the resourcing issues had been resolved.
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 new year.
The Committee RESOLVED to:
1. Note the content of the report.
2. Note the Independent Advisor’s quarterly commentary report.
3. Note the PIRC reports
4. Note the detailed fund performance by Mercer
Minutes of 18th February 2020
Attendance
That it should be noted Ms Kehinde Akintunde, GMB Union Representative, was in attendance, at the meeting of the 18th February 2020.
Pension Board update
Mr John Jones, Chair of the Pensions Board asked the minute for the 18th February 2020 be amended to reflect that the Pension Board had raised concerns regarding the pension administration of the Pension Fund over several years, prior to the matter being referred to the Pensions regulator. The Chair, Councillor Perry acknowledged this to be the case and said several conversations had taken place between herself and Mr Jones on the matter.
2.1 Equity Protection Strategy
Discussion took place as to whether a decision was made regarding the Equity Protection Strategy and what had been agreed in respect to letting this run off and expire. Mr Kevin Bartle, Interim Division Director for Finance, Procurement and Audit said there was on item was on the agenda where this would be discussed further.
The Chair, Councillor Perry asked that it be NOTED that she telephoned all committee members, after the meeting of the 18th February whereby it was unanimously AGREED that the first stage of the strategy would be let to run and expire.
The Pensions Committee RESOLVED to AGREE to the above amendments to the minutes of the 28th November 2019 and the 18th February 2020.
Supporting documents: