Agenda and draft minutes

Apologies were received from Robert Austin.

Members are asked to declare any interest and the nature of that interest that they may have in any of the items under consideration at this meeting.

Peter Borley-Cox declared a disclosable pecuniary interest as a member of LGPS. Councillors Phil Bignell and Graham Lawman disclosed personal interests as their wives are deferred members of LGPS.

To receive communications from the Chair.

There were none.

The Investment Sub-Committee to receive a quarterly performance update from Mercer for the period ending 22 June 2022.

At the Chair’s invitation, Chris West from Mercer presented the quarterly performance report. He highlighted the executive dashboard and explained that liabilities had fallen over the quarter in response to the unprecedented rise in inflation and interest rates. The alternative portfolio was reported as 4% overweight, the listed equities and fixed income portfolio 2% underweight and the overall performance was -7.3% which was 1% behind the benchmark return. He explained that Baillie Gifford would be attending the meeting later and members would have an opportunity to question their underperformance over the quarter.

Members asked questions surrounding currency and the change in Mercer’s view from overweight to neutral. Mercer responded that the fund did hold assets in other currencies and the pound weaking against the dollar did provide some benefit to the investments. The change in view reflected that the outlook on bonds and equities were less favourable but the outlook had improved in other areas. Members questioned the interest rate in the UK and Mercer stated that the expectation was that the base rate would go up to 4.5% and that it would remain high for longer, and the war in Ukraine would resolve some of the economic issues.

Mercer continued their report and explained that in terms of the asset allocation government bonds and equity showed underweight, DGF was underweight and private equity held up their value as it would take longer for the negative sentiment to come through. Quarter 3 so far had witnessed a bounce back in equity markets and a positive return across the board. He explained that a strategy review would take place shortly, as the market was volatile at the moment so the position could quickly change. Mercer summarised the fixed income portfolio and explained they would continue to monitor the situation which concluded their report.

RESOLVED: That the Investment Sub-Committee noted the quarterly performance report for the period ending 22 June 2022.

The following report(s) contain exempt information as defined in the following paragraph(s) of Part 1, Schedule 12A of Local Government Act 1972.

*DELETE AS APPROPRIATE*

Paragraph 1 – Information relating to any individual.

Paragraph 2 – Information which is likely to reveal the identity of an individual.

Paragraph 3 – Information relating to the financial or business affairs of any particular person (including the authority holding that information).

Paragraph 4 – Information relating to any consultations or negotiations, or contemplated consultations or negotiations, in connection with any labour relations matter arising between the authority or a Minister of the Crown and employees of, or office holders under, the authority.

Paragraph 5 – Information in respect of which a claim to legal professional privilege could be maintained in legal proceedings.

Paragraph 6 – Information which reveals that the authority proposes;

a)    To give under any enactment a notice under or by virtue of which requirements are imposed on a person; or

b)    To make an order or direction under any enactment

Paragraph 7 – Information relating to any action taken or to be taken in connection with the prevention, investigation or prosecution of crime.

Members are reminded that whilst the following item(s) have been marked as exempt, it is for the meeting to decide whether or not to consider each of them in private or in public. In making the decision, members should balance the interests of individuals or the Council itself in having access to the information. In considering their discretion members should also be mindful of the advice of Council Officers.

Should Members decide not to make a decision in public, they are recommended to resolve as follows:

“That under Section 100A of the Local Government Act 1972, the public and press be excluded from the meeting for the following item(s) of business on the grounds that, if the public and press were present, it would be likely that exempt information falling under the provisions of Schedule 12A, Part I, Paragraph(s) XXXXX would be disclosed to them, and that in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information.”

The Chair moved that the remainder of the meeting be held in private:

That under Section 100A of the Local Government Act 1972, the public and press be excluded from the meeting for the following item(s) of business on the grounds that, if the public and press were present, it would be likely that exempt information falling under the provisions of Schedule 12A, Part I, Paragraph(s) 3 would be disclosed to them, and that in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information.

RESOLVED: Members agreed that the public and press were excluded from the remainder of the meeting and the Investment Sub-Committee moved into private session.

RESOLVED: Members noted the informal notes from the previous meeting held on 21 June 2022.

The Investment Sub-Committee to review the action log.

The Funding and Investment Manager summarised the action log and explained that the climate action plan was on track and there were virtual investment manager presentations on climate aware passive options arranged for 5 September and 3 October 2022 and following these a decision would be taken at the Investment Sub-Committee in November. He explained the other items on the action plan had been completed, apart from the Mercer action to make reports more accessible which was ongoing.

RESOLVED: That the Investment Sub-Committee noted the action log.

At the Chair’s invitation, Chris West from Mercer delivered a presentation on Baillie Gifford DGF and LTGG Manager Briefing. Mercer explained their presentation focus would be on their equity portfolio but would touch on DGF. Mercer had given Bailie Gifford a rating of B+ as they were a firm with a strong ethos with a long-term approach to investment as a growth manager that looked at allocation from a strategic point of view.

Members discussed Mercer’s presentation and then Chris Murphy and Tatjana Evans-Macleod were invited to join the meting to deliver their presentation on the Northamptonshire LGPS.

Members discussed the presentation. The Chair thanked Chris and Tatjana for attending the meeting and delivering their presentation.

RESOLVED: That members noted the manager presentation from Baillie Gifford. 

At the Chair’s invitation, the Funding and Investment Manager presented the report on BlueBay Multi Asset Credit, Environmental, Social and Governance. He summarised the report and explained that BlueBay had brought a new ESG variant to the market that had been offered to the fund with less exposure to emerging markets. Hertfordshire Council had been offered similar and the report recommended that the Investment Sub-Committee expressed a preference to switch to ESG markets were there are carbon savings and less volatility.

Members discussed the long term benefits of switching to ESG and the reputational benefits for the fund as it would bring an estimated 35% carbon reduction.

RESOLVED: That the Investment Sub-Committee expressed a preference to onboard the MAC ESG product as an ACCESS sub fund in place of the standard MAC product offered by BlueBay.

At the Chair’s invitation, the Funding and Investment Manager introduced the item and explained that Mercer had prepared a presentation to deliver to the Investment Sub-Committee.

The Funding and Investment Manager handed over to Chris West from Mercer to deliver the presentation on the Northamptonshire Pension Fund Property Portfolio Review.

RESOLVED: That the Investment Sub-Committee noted the report and approved Mercer to carry out a market review and provide a selection of Long Lease property managers to the Investment Sub-Committee.

There were no other items of business.