Mr Colin Robertson, Independent Adviser to the Committee and Mr Steve Turner from Mercer presented the Quarterly Performance Review report. The report informed members of the performance of the Pension Fund investments and its investment managers for the quarter ending March 2021.

Mr Robertson provided the Committee with his analysis of the markets and referred to his report appended at Appendix A. He said the equity markets continued to perform strongly in Q1 of 2021 as the vaccine rollouts in the UK and US had proved to be a success. He said the forecast for economic growth in 2021 had been revised up and a huge stimulus package had been announced in the US, boosting equity markets. With respect to bonds, these had not performed well especially US Treasury Bonds and UK gilts.

Mr Robertson said an economic recovery had clearly taken hold but the risks to the outlook were not insignificant as policymakers weighed up the risks of tightening policy too soon which could lead to a recession against tightening too late and letting inflation soar. In respect to the equity markets, Mr Robertson said potential risks included higher taxation and regulation as well as increased labour costs.

Mr Robertson talked about categorising the various asset classes into 4 groupings. He explained the benefits of investment in each grouping.

Mr Robertson also referred to the comparator and target benchmarks which had been introduced by the London CIV, along with ‘Peer Analysis’. He said these needed to be properly explained by the London CIV and he had asked them to do so. 

Mr Turner from Mercer added that low carbon equities which are hedged into sterling should be reviewed as they were overweight. He said discussion in respect of property assets and rebalancing would make sense. He referred to Ruffer and said they had invested in Bitcoin which has seen a positive investment performance but had exited that market before the current downturn.

In response to questions from Members the following was noted:

• In reference to the asset allocation categories, Mr Robertson said these were highlighted with regard to the possible direction of travel for the Fund. There were risks associated with each of them and therefore the Committee would need to make decisions based on market conditions at the time.
• Mr Robertson explained that he had stated his concerns regarding the London CIV and had cautioned against them being ‘unduly ambitious’ given their limited resources. In some instances it was important for them to use external advisers, potentially for both manager selection and product design, He said that both Miriam Adams and himself had conversations with the CIV, asking them to take advice from experts in relation to the renewable energy fund.
• Referring to appendix 3, page 270 onwards, Councillor Wood asked for comment on the performance of the Schroder’s equity protection strategy. He said there was lots of red rated performance. Mr Robertson responded stating that the report was poorly constructed and said the equity protection strategy performance ought to have been in the asset allocation section rather than in the manager performance report. This would have made it clearer that the poor equity protection strategy performance was the other side of the strong underlying equity performance. Mr Turner added that it would be useful to bring a report to the next committee meeting with a review/update on Schroder and the equity protection.

• ACTION: The Pensions Committee to receive an update on the equity protection strategy and the performance of Schroders.

The Pensions Committee RESOVLED to:

1. Note the content of this report.
2. Note the Independent Adviser quarterly commentary (Appendix A).
3. Note the suggested asset allocation categorisation by the Independent Adviser (Appendix A).
4. Note the performance reports and manager rating (Appendix B) and
5. Note the performance report prepared by Fund Custodian Northern Trust (Appendix C).