Agenda and draft minutes

Apologies for absence were received from Councillor Charles Morton.

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.

Robert Austin declared a disclosable pecuniary interest as a member of LGPS. Councillor Graham Lawman disclosed personal interests as his wife was a deferred members of LGPS.

To confirm the minutes of the previous meeting held on 21 September 2022.

It was highlighted that Chris Murphy and Tatjana Evans-Macleod who had been in attendance at the last meeting and worked for Baillie Gifford not BlueBay.

RESOLVED:

That, subject to the above amendment, the minutes of the Investment sub-committee of 21 September 2022 be approved and signed as a correct record.

The Investment Sub-Committee to receive a quarterly performance update from Mercer for the period ending 30 September 2022.

At the Chair’s invitation, Chris West from Mercer presented the quarterly performance report. Referring to the executive dashboard, he explained that liabilities had fallen over the quarter in response to the persistent high inflation and interest rates. Investment Managers had expected that there would be a 2-3% rise but the markets were now pricing at rates of 5%. There was a global recession; sterling had been weak, particularly at the end of September which was linked to the volatility caused by the mini budget. The fund had not been exposed to the LDI’s (Liability Driven Investment), therefore unaffected. The gilts had fallen in value as the interest rates had risen. Liabilities had fallen in material value. The funding level as at 30 September 2022 was 130% which was higher than in June, largely driven by a fall in funding liability.

Mercer continued their report and explained that although the liquid assets were underweight, private equity and infrastructure were overweight. Some balancing was being undertaken to address this. The investment strategy review would be coming through next year and the standalone UK equity allocation would be considered as part of this.

The Committee’s attention was drawn to the management performance table on page 9 of the report. Baillie Gifford had underperformed by -38%, this had been expected and was still up from their inception. They had advised that they would invest in growth companies. The gilt market was volatile but yields had gone up and the falls in liabilities had resulted in a net positive position. Bluebay generally invested in more risky ventures and it appeared that they had underperformed but it was broadly in line with the performance over the market. When market conditions were more favourable and the asset values lowered, it was expected that Bluebay’s performance would improve.

Councillor Bignell raised concerns that the value of Peloton had reduced significantly. David Crum highlighted that it was expected that the performance of some businesses would suffer but the results had to be looked at in their entirety.

Robert Austin queried whether the benchmark for performance should be altered. Mercer explained that benchmarking was only one of the assessment tools that they used. Baillie Gifford was an exceptional case.

Referring to the performance table, Mercer noted that there were some outstanding returns for private equity mandate because of the strength of the US dollar, but this was not a large area of the portfolio. Regarding the infrastructure funds, money was locked up so there may be fewer assets in the portfolio. The Chair queried whether any action needed to be taken. Mercer advised that this would be addressed as part of the investment strategy review next year. The re-balancing to the gilts was ongoing and would be considered at year end. The equity portfolio would also be reviewed. The inflation risk would be managed and cashflow was a larger risk.

Further to an enquiry from Councillor Lawman, Mercer advised that the performance difference between the two infrastructure companies was due  ...  view the full minutes text for item 76.

The Funding and Investment Manager advised that the report would be submitted to the Committee on a six-monthly basis and drew their attention to the summary in section 2 of the report and the voting activities in section 6. Paragraph 6.1.7 of the referred to the ACCESS guidelines, which would be revisited soon.

The Funding and Investment Manager highlighted an example of an engagement that had taken place and also some voting actions as examples of the kind of detail that exists behind the report. The report would be extremely long if officers were to add all this detail as an appendix. The Committee were asked if they wanted more details; the Chair considered that exception reports would be sufficient.

Robert Austin enquired if any voting opportunities had been missed. Ben Barlow did not believe there had been but undertook to ascertain this.

RESOLVED: That the Investment Sub-Committee note the Stewardship Report.

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.”

RESOLVED:  That Under Section 100A of the Local Government Act 1972, the Local Pension Board agreed that the public be excluded from the meeting for the following items of business on the grounds that if the public were present it would be likely that exempt information under Part 3 of Schedule 12A to the Act would be disclosed to them.