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Report to:
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Pension Committee
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Date:
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20 July 2022
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By:
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Chief Finance Officer
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Title of report:
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Investment Report
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Purpose of report:
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This report provides Pension
Committee with an update on the investment activities undertaken by
the East Sussex Pension Fund.
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RECOMMENDATION
The Pension Committee are
recommended to:
1)
note the Investment
Workplan (appendix 1);
2)
note the Quarterly
Investment Report from the Investment Advisor, Isio (appendix
2)
3)
note the investment
strategy review (appendix 3) and agree the following amendments to
the implementation plan for the investment strategy:
·
maintain the
absolute return mandates until the infrastructure equity mandate is
drawn;
·
to continue using
the corporate bonds to fund the new diversified credit
mandate;
·
retain the
index-linked gilt allocation over the short term;
·
trim the core
property exposure and hold this in index linked gilts until
decision made on inflation-linked property;
·
re-visit the case
for inflation-linked property in the current environment ahead of
implementing the strategic allocation.
4)
note the equity
performance and investment outlook considering investment style and
exclusions;
5)
note the update on
the Carbon footprint of the Fund;
6)
note the Q1
Engagement Report (appendix 4);
7)
approve that
officers make a submission of the Stewardship Code to the Financial
Reporting Council (FRC);
8)
note the External
Assurance report update;
9)
note the ACCESS
update; and
10)
delegate
authority to the Chief Finance Officer to take all necessary
actions to give effect to the implementation of the above
recommendations
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1.
Background
1.1
Under the Local
Government Pension Scheme (LGPS) Regulations, the Council is
required to maintain a Pension Fund for its employees and other
‘scheduled bodies’ as defined in the Regulations. The
Pension Committee is required to maintain an Investment Strategy
Statement (ISS) to govern the Funds’ investments and receives
a quarterly investment monitoring report, from its investment
consultant, Isio.
1.2
The ACCESS Joint
Committee has been established as a result of the changes
implemented in the 2016 LGPS Investment regulations to facilitate
the arrangements relating to the collective investment vehicles, to
allow the administering authorities to pool their respective
investments. The ACCESS Joint Committee meets quarterly.
2.
Action Log and
Investment Workplan
2.1
Appendix 1 shows the
Workplan which acts as the reference point of all actions agreed at
Pension Committee meetings and areas of work anticipated over the
next 12 months. Unless otherwise stated, items in the workplan are
to be considered by the Committee or a comment provided explaining
why the item is not to be covered at this time.
2.2
The main focus over
the next 12 months is the ongoing review of Responsible Investment,
with a focus on climate analysis for the Fund, with the
implementation of the investment strategy where investment
opportunities are possible, as agreed at the 12 July 2021 Pension
Committee meeting.
3.
Quarterly
Performance Report
3.1
The Quarterly
Performance Report is attached as appendix 2. Since the last
quarter, the valuation of the Fund decreased from £4.74bn as
at 31 December 2021 to £4.68bn as at 31 March 2022 (a
decrease of £0.06bn). A negative absolute return of 1.2% over
the quarter, underperforming its respective benchmark by 0.7%.
Performance across mandates was relatively mixed, with
Russia’s invasion of Ukraine, coupled with growing
inflationary pressures being drivers of market volatility over the
quarter.
3.2
Over the period, the
private equity mandates (Harbourvest and Adam Street) continued to
deliver strong returns, with private markets often slower to adjust
to macroeconomic conditions. Similarly, the infrastructure and
property mandates performed well, partially driven by the
assets’ inflation linkage.
3.3
The Fund’s
Equity allocation was the largest detractor from returns, with
sustainable funds underperforming more traditional markets, due to
limited exposure to the energy sector and tilts towards high growth
stocks, which lagged traditional energy and financial firms over
the period.
4.
Investment
Strategy Review
4.1
The investment
strategy was last reviewed in July 2021, with the Committee
agreeing the following changes to the Fund’s strategic asset
allocation:
·
Reduced target
allocations for diversified growth, balanced property, corporate
bonds and index-linked gilts.
·
Increased target
allocations for infrastructure equity, inflation-linked property,
private credit and diversified credit.
4.2
Amendments to the
Investment Strategy Statement (ISS) were subsequently agreed at the
September 2021 meeting to the following strategic asset
allocation:
|
Asset class
|
Target
allocation
%
|
Maximum
invested*
%
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Role within the
Strategy
|
|
Global Equity
|
40
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44
|
Growth Assets
|
|
Absolute Return
|
17
|
23**
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Growth Assets
|
|
Private Equity
|
5.5
|
7.5
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Growth Assets
|
|
Property
|
7
|
10
|
Income Assets
|
|
Inflation-Linked
Property
|
4
|
5
|
Income Assets
|
|
Infrastructure
|
11
|
12
|
Income Assets
|
|
Private Credit
|
5
|
5
|
Income Assets
|
|
Diversified Credit
|
10.5
|
12
|
Income Assets
|
|
Index-Linked Gilts
|
-
|
4**
|
Protection Assets
|
|
Corporate Bonds
|
-
|
4**
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Protection Assets
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Cash
|
-
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2
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Protection Assets
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Total
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100
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*The maximum invested figures
are based on the rebalancing ranges agreed by the East Sussex
Pension Committee within its rebalancing policy.
** Additional allowance to
rebalancing figures whilst allocations to infrastructure, private
debt and inflation linked property take place.
4.3
To assist the
Committee Isio have undertaken a review of the Fund’s
investment strategy and implementation plan and provided a report
on their findings (appendix 3) and will present this to the
Committee. This has taken place due to the change in market
conditions since the last review which have been extremely
volatile, largely due to Russia’s invasion of Ukraine,
increasing global interest rates in response to surging inflation,
slowing global economic growth and the ongoing impact of Covid-19.
As such, the Fund’s liquid assets – notably equities,
absolute return, corporate bonds and gilts – have all fallen
in value since strategy was agreed.
4.4
The agreed
implementation plan for the Fund involved the following key
steps;
·
Global Equity
–Onboard Baillie Gifford and Osmosis and fund this from the
UBS passive mandate (complete)
·
Infrastructure–Implement
higher allocation through commitment to IFM investors Global
Infrastructure Fund. This was expected to be largely funded from
the absolute return mandates – commitment made, awaiting
drawdown.
·
Diversified credit
–Aim is to select a manager from the ACCESS platform and fund
this from the sale of corporate bonds, given the low yield at the
point of the strategy review, and to improve overall
diversification of the credit allocation.
·
Private credit and
Inflation-linked Property –The implementation approach was to
be confirmed depending on ACCESS timescales to make propositions
available. ACCESS is not yet able to provide firm timescales and
the Fund do not anticipate allocation via the ACCESS platform to be
available over the short term. The intention was to fund private
credit from index linked gilts and inflation linked property from
the existing Balanced Property allocation.
4.5
The revised strategy
is expected to increase the portfolio’s expected return to
around 5.5% per annum, whilst broadly maintaining the previous
level of downside risk. Isio continue to believe that the agreed
direction of travel remains appropriate but believe that the
implementation approach should be adapted to reflect evolving
market conditions. After considering these events. Isio propose the
below recommendations:
·
maintaining the
absolute return mandates until the infrastructure equity mandate is
drawn (anticipated in 9-18 months).
·
to continue using the
corporate bonds to fund the new diversified credit
mandate.
·
retaining the
index-linked gilt allocation over the short term given its recent
material fall in value and the inflation protection
offered.
·
trim the core property
exposure (which is currently earmarked for inflation-linked
property) and hold this in index linked gilts in the
interim.
·
re-visit the case for
inflation-linked property in the current environment ahead of
implementing the strategic allocation.
4.6
The objectives of the
Investment Strategy are;
·
to deliver a return
that improves the funding level over time (to achieve future lower
employer contribution rates),
·
with as little
volatility in the funding level as possible (to maintain stability
of contributions as far as possible), and
·
maintain sufficient
assets to meet liabilities i.e. an overall funding level of 100% or
more.
The assumptions underlying the
Actuary’s funding basis are important factors in determining
the return requirement. As the Fund grows, it will also be
important to ensure that stability, relative to sponsor budgets, is
maintained.
4.7
The current
Investment Strategy is positioned so that it can achieve an
expected return of 5.5% per annum. This level of return has been
factored into the valuation calculations in the 2019 valuation. To
move the expected return of the strategy down i.e. to remove some
of the investment risk in the portfolio would also require the
Actuary to adjust the valuation calculations which could result in
increased contributions from employers. The next triennial
valuation is currently taking place based on the data as at 31
March 2022, with new contribution rates for employers coming into
effect from April 2023. A full review of the investment strategy
will take place in 2023 once the results of the valuation are
known, so officers and advisers do not suggest any major changes to
the investment strategy are considered at this time.
5.
Performance of
Growth, Value and exclusionary equity holdings
5.1
The Fund made some
fundamental changes to its Equity strategy between 2020 and 2022,
moving to more sustainable equity mandates, looking to invest in
climate solutions. This led to the appointment of its impact
managers Wellington and WHEB. The Fund also moved back to a more
active equity position by moving passive holdings to Longview,
Baillie Gifford, Wellington and WHEB. The last change to the equity
strategy was to remove its unintended holdings of fossil fuel
companies from its passive mandates by moving from market
capitalisation indexes to climate risk/resource efficiency indices
run by Storebrand and Osmosis.
5.2
The result of these
changes have been to impact upon the overall style and volatility
of the equity investments of the Fund. The shift from passive to
active management increases the volatility within the equity
portfolio as the investments no longer track the market but look to
have more conviction in the reasons for investing in a specific
company, due to the risk profile, deemed impact or opportunities
and the return profile expected. The belief is that this will over
a cycle be a greater benefit to the Fund than holding it passively,
however this will also be more costly from a fee perspective.
However, this also means there will periods of greater
underperformance than has been experienced in recent years, within
the Fund’s equity position.
5.3
Secondly the change
to active managers with a climate opportunities focus has seen a
shift in style away from value towards growth. This has come
through as climate solution investments are inherently more growth
orientated, looking for a gap in the market and those companies
trying to fix a problem. So, within the climate crisis there are
many companies being established trying to do something different
and looking to grow and be the market leader.
5.4
To help provide
some context to the performance of our equity managers over the
first quarter of 2022 the below table shows the comparison of the
Fund’s Managers (excluding UBS/Osmosis as this transitioned
in the Quarter) against the performance of the MSCI ACWI (all
countries world index) excluding Fossil Fuels, MSCI Value and MSCI
Growth indexes relative to the MSCI ACWI Index.
|
Manager
|
Strategic Allocation
|
Actual Allocation
|
Absolute Performance
|
Relative
Performance*
|
|
Longview
|
10
|
11.2
|
0.8
|
3.5
|
|
Wellington
|
5
|
5.1
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(5.3)
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(2.8)
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|
WHEB
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5
|
4.9
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(10.4)
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(8.0)
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Baillie Gifford
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5
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4.2
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(12.4)
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(10.1)
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Storebrand
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10
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10.9
|
(5.1)
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(2.6)
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|
MSCI ACWI**
|
n/a
|
n/a
|
(2.6)
|
-
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|
MSCI ACWI ex Fossil
Fuel**
|
n/a
|
n/a
|
(3.8)
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(1.2)
|
|
MSCI ACWI Value**
|
n/a
|
n/a
|
1.9
|
4.6
|
|
MSCI ACWI Growth**
|
n/a
|
n/a
|
(7.1)
|
(4.6)
|
*Relative performance is
against the MSCI ACWI performance derived from the MSCI website and
may not match the figures in the performance report.
**Figures derived from the MSCI
website and are not used to calculate performance figures are being
used to demonstrate possible attribution to performance.
5.5
The table shows
that both the growth style and ex fossil fuel attributes have been
a detractor to the performance of the Fund being 4.6% and 1.2%
below the MSCI all countries world index. The table shows that 2 of
our managers Baillie Gifford and WHEB performed particularly poorly
compared to the benchmark in the quarter. (10.1% and 8.0%
respectively).
5.6
Further insight
from the managers, into the outlook for the equity mandates are
included in the exempt section of this committee report
pack.
6.
Carbon
footprinting
6.1
The Fund appointed Moodys (formally
Vigeo Eiris) to conduct a carbon footprint measurement on its
liquid investments as at 31 March 2022. This is the third year of
collating this information against which the Fund can monitor the
progress of its investment decisions in relation to climate change.
This also provides the Committee with information to assist them in
their duties in ensuring the Fund’s managers are representing
their beliefs in the investments they make.
6.2
Carbon footprinting and Transition
scoring are still a relatively new science, there is limited
consistency in the scoring between providers and can be quite
subjective. The carbon footprint reports have been produced to help
the Fund understand the direction that the Investment Managers are
moving and to focus engagement during discussions with the
Investments Managers for the coming year.
6.3
The report looks at the Carbon
Footprint of the underlying companies within each investment
managers’ portfolio (based on scope 1 & 2 emissions). The
score for the mandates range from Moderate, Significant, High and
Intense based on the ranges in the table below. The emissions
levels are based on the weighted average company carbon emissions
within each Investment managers portfolio. In addition, the report
looks at the energy transition of the investments, to determines
how the companies are positioned to respond to a shift from a
carbon based economic model to a green and sustainable
one.
Carbon
Footprinting
|
Scale
|
Emissions (t CO2
eq)
|
Categories
|
|
A
|
<100,000
|
Moderate
|
|
B
|
>=100,000
& <1,000,000
|
Significant
|
|
C
|
>=1,000,000
& <10,000,000
|
High
|
|
D
|
>=10,000,000
|
Intense
|
Carbon footprint is measured in equivalent tons
of carbon dioxide (t CO2 eq.) emitted by issuers
|
Scale
|
Energy Transition
Score
|
Categories
|
|
+ +
|
60-100
|
Advanced
|
|
+
|
50-59
|
Robust
|
|
-
|
30-49
|
Limited
|
|
- -
|
0-29
|
Weak
|
6.4
This gives an overall portfolio
score from A++ to D--. For the Fund’s 2022 Carbon footprint
we have no D rated portfolios similar to 2021 and 3 in 2020. We
have 2 B rated portfolios the same as in 2021, which are both
active mandates run by Longview and Wellington. The remaining
managers are rated C as in 2021.
6.5
This lack of movement at the high
level carbon footprinting scale does not take into account
underlying changes in the scoring at this level. 5 mandates reduced
their carbon footprint over the year however the other 4
increased.
6.6
On the Energy transition rating we
have 1 portfolio (M&G Corporate Bonds) mandate graded as Robust
or “+”, this is 1 lower than in 2021 due to the removal
of the passive UBS Europe Ex UK Fund. This was part of the
strategic change from market cap indexes to the passive UBS\Osmosis
resource efficiency mandate and the Ballie Gifford Global Alpha
mandate (prior to this transitioning to the Paris Aligned version
within ACCESS shortly after the measurement date).
6.7
Comparing the mandates that have
transitioned since the last measurement date, the energy transition
score of the Fund has weakened by 3 points, however the total
carbon footprint has reduced by 3.4m t CO2 eq. on the weighted
average carbon footprint score. At the time of the data the Baillie
Gifford fund had not transitioned to the Paris aligned structure,
so we would expect that next year this would reduce its carbon
footprint further.
6.8
On the energy transition rating
there was improvement made by all managers on the underlying
transition score basis. All managers achieved a score of above 30
with 9 scoring 40 or above (6 mandates achieved this in 2021). Not
all companies will have an energy transition plan in place - lower
emitting sectors and industries are less likely to have robust
energy transition plans, while it is essential for intense carbon
emitters to have plans in place and strong action plans. The
scoring does not reflect the difference expected across
industries.
6.10
The individual reports for each of
these managers has been included in the exempt section of the
committee agenda under item 12. Along with commentary from the
managers around how they consider these results.
7.
Engagement
Report
7.1
As part of its
transparency reporting for ESG, climate change, voting and
engagement, the Fund has updated the last quarterly published
statement on ESG to show the funds current position based on
existing strategies in place and actions taken by the Fund during
the quarter 1 January 2022 to 31 March 2022. The statement includes
the voting record by the Fund’s managers. Only managers
holding equities will have voting rights on behalf of the Fund. The
updated statement is included in appendix 4.
8.
Stewardship
Code
8.1
The UK Stewardship
Code 2020 sets high stewardship standards for those investing money
on behalf of UK savers and pensioners. Stewardship is the
responsible allocation, management and oversight of capital to
create long-term value for clients and beneficiaries leading to
sustainable benefits for the economy, environment and
society.
8.2
The Code applies to
asset owners, asset managers and service providers, and comprises a
set of 12 “apply or explain” principles for asset
owners.
8.3
To become a signatory
the Fund must submit a Stewardship Report to the FRC demonstrating
how they have applied the Code’s Principles in the previous
12 months. The report can cover any 12-month period after 1 January
2020.
8.4
Once submitted the FRC
will assess the report and, if it meets the reporting expectations,
the Fund will be listed as a signatory to the Code. Once listed as
a signatory the Fund would need to report annually to remain as a
signatory.
8.5
The next deadline to
submit to the FRC is the 31 October 2022. The next deadline to
submit to the FRC is the 31 October 2022.
8.6
Within the ISS the
Fund have made a number of commitments for stewardship and
Responsible Investment within the Statement of Investment
Principles (SIRP). The SIRP was approved in September 2020. One of
the commitments made within the SIRP was to become a signatory of
the revised 2020 Stewardship Code. Officers have drafted a
Stewardship Report and will continue finalising this including
ensuring the document is accessible. Approval is requested for the
Fund to submit its Stewardship report which covers the 2021
calendar year before the next submission deadline.
9.
External
Assurance Reports
9.1
As part of the
ongoing investment governance that is performed by the Fund,
officers monitor the external assurance reports that are provided
by the Fund’s investment managers. These reports detail the
internal controls of the managers and provide an opinion as to the
effectiveness of these controls. The Fund has strengthened its
procedures in reporting these qualifications to Pension Committee;
this is to be at the earliest opportunity available along with
increased oversight of the process. The team have documented a
process note for reviewing these statements in accordance with the
recommendation within the internal audit report – pension
fund investments.
9.2
During the quarter
the Fund received 2 external assurance reports that were qualified
by the external auditors. The Managers were Longview and M&G
the reasons these were qualified are:
Longview
9.3
The qualified audit
opinion was given due to a limitation of testing that was able to
be completed by the Auditor. This was due to Longview migrating IT
desktop and helpdesk service provider in April 2021. This change
resulted in a limitation of some of the testing the auditor was
able to perform on data prior to the transfer of services. No
further issues were found that were not directly related to the
timing of the audit coinciding with the cessation of the old
service.
M&G
9.4
The auditors of
M&G qualified the external assurance report on the control
objective 27 (logical access controls) for controls to be in place
to restrict logical access to in-scope systems and data to
authorised individuals in accordance with job roles and/or business
requirements.
9.5
The findings from
the testing of this control identified several instances of no
evidence being provided for access creation, revocation,
reconciliations, review and password management on the systems. On
their own these would not have qualified however the auditor
considered that the combined impact of these lead them to qualify
this point.
9.6
Except for the
matters described in the Basis for qualification in respect of
control objective 27 (logical access controls) the Activities that
were tested, were those necessary to provide reasonable assurance
that the related Control Objectives were achieved.
9.7
The Fund is
satisfied that there was no impact to the assets held by Longview
and M&G due to management responses within the reports but will
note these findings to ensure these items have been resolved in the
next reports.
10.
ACCESS
Update
Member
representation
10.1
At the Pension
Committee in February 2022 the Committee discussed arrangements for
member representation on the ACCESS Pool Joint Committee following
the guidance issued by the Scheme Advisory Board (SAB). The ACCESS
Pool’s proposal was to have six rotating observers for each
meeting drawn from three of the eleven constituent authorities. The
six representatives would be comprised of one employer and one
scheme member representative from the Pension Board of each, from
the three rotating authorities.
10.2
At the Joint
Committee meeting in March 2022 an amendment to the recommended
structure was put forward for an election of two scheme
representatives to attend Joint Committee meetings for a period of
four years, to aid consistency and learning by those individuals to
feed into all pension boards with a review of these arrangements
after the first full year following election. This motion was lost,
so the Joint Committee considered the original proposal.
10.3
The original
proposal was agreed by a majority vote with the agreement to
undertake a review of the arrangements after a full year following
their implementation.
Inter-Authority Agreement
(IAA)
10.4
Work has been
undertaken in order to draft the amendments required to the IAA in
order to enable the Joint Committee to formally recommend
guidelines to Councils. The drafting is below:
“The Joint
Committee shall have the ability to make recommendations to the
Councils about the adoption and content of guidelines for the Pool,
including to allow common guidelines or policies of the Councils to
be applied to the Pool, Pool Assets and/or Pool Aligned Assets, and
for any such guidelines that are adopted to be periodically
reviewed and updated. When determining the content of such
guidelines, the Joint Committee shall consult with and consider the
advice of the Section 151 Officers Group (and, where requested, the
Monitoring Officers and from appropriate professional advisers).
Any guidelines for the Pool must not go beyond policies already in
place and will not supersede or replace the Investment Strategy
Statement or policies of each Administering Authority."
10.5
At the March 2022
meeting of the Joint Committee, proposals on Local Pension Board
observation was agreed which also requires amendments to the IAA to
take place.
10.6
During April 2022
the Officer Working Group considered drafting covering the above
points, along with two further changes brought to the attention of
the ASU by ACCESS Authorities:
·
in instances
whereby the Vice Chairman of an s101 Committee is an Elected
Member, but not of the Administering Authority; it is currently not
possible for that individual to substitute for the regular Joint
Committee Member (who is generally the s101 Chairman). An amendment
to the IAA enabling an Elected Member from an associated Authority
who is as101 Committee Member to be a JC substitute, has been
drafted.
·
it is currently
possible for Members of a s101 Committee who are Elected Members of
the Administering Authority to attend the Joint Committee as
observers. However, such rights do not apply to Members of s101
Committees who are not Elected Members of the Administering
Authority. An amendment to the IAA enabling Members of s101
Committees who are not Elected Members of the Administering
Authority to observe JC meetings, at the discretion of the JC
Chairman, has been drafted.
10.7
As a consequence of
the Joint Committee decisions, a proposal from Suffolk County
Council to amend the IAA was circulated to Monitoring Officers on
22 April 2022. Comments were invited by 20 June. The Suffolk
proposal, if agreed, would:
·
introduce an
express provision for the Joint Committee to have the ability to
make recommendations to the Councils about the adoption and content
of guidelines for the Pool;
·
allow for observers
from nominated Local Pension Boards to attend the Joint Committee
meetings; and
·
make the rules
around Councils nominating substitutes for Joint Committee members,
and s101 Committee Member attendance more flexible.
10.8
The Monitoring
Officer has not reported any objections with the proposed changes,
which will enable delivery of the Joint Committee decisions,
however it is possible the wording may be amended resulting from
comments of other Council monitoring officers. Once the final
wording has been agreed subject to the comments from monitoring
officers each Fund will be asked to agree and sign the revised IAA.
The final IAA will be brought to the Pension Committee for approval
prior to signing.
Governance Manual
10.9
Work has been
undertaken on updating the Governance Manual. Following agreement
from s151 Officers, Technical Lead officers from West Sussex
reviewed the Manual, identified themes and launched a project to
highlight the areas of highest risk to the delivery of the ACCESS
Business Plan. This work formed the basis of the revised Governance
Manual which has been comprehensively updated. The draft revision
was taken to the Officer Working Group in early April. It was then
presented at a special meeting of ACCESS s151 Officers on 6 May
2022. The ASU will continue to work to develop and embed the
protocols around the processes set out in the revised Governance
Manual.
Sub Fund updates
10.10
As part of the initial Operator
Agreement, Link, as Operator to the ACCESS ACS, undertook to launch
35 sub-funds within the contracted price. It is understood that
further sub-funds will be subject to additional charges.
10.11
All requests for new sub-funds are
considered in line with both the protocol and guiding principles
(which reflect the concepts of both self-regulation and peer
review) and approved by the Joint Committee. At all times it is
important to note that the Joint Committee is not a Financial
Conduct Authority (FCA) Regulated entity and therefore cannot make
recommendations on investment matters. This means that for Joint
Committee approved sub-fund requests these are then subject to
Link’s extensive due diligence as ACS Operator, to allow any
sub-fund to be established.
10.12
Currently there are 26 completed
sub-funds and a further nine in development, totalling 35 sub-funds
that Link have contractually agreed to launch. After carrying out
some analysis of the unpooled assets, East Sussex were identified
as having requirements that are not yet achievable through the pool
or its pipeline. These are for the allocations to the smart beta
climate fund and sustainable impact investments. The Fund is
working with the ASU to put forward our needs and understand the
costs associated with these potential sub-funds as it would be
beneficial to pool these assets, however the Fund would need to
consider value for money in moving these onto the pool platform as
additional costs would be overlayed above those the Fund is
currently paying to access these investments.
10.13
In addition to the new sub-funds
there are changes required to the existing sub-funds an example of
these is the change to the Baillie Gifford Global Alpha sub-fund to
make this the Ballie Gifford Global Alpha Paris aligned which
happened in Q2 of 2022. There are currently 4 existing sub-funds
subject to changes which are being managed along with the new
launches.
Internal Audit
10.14
Essex County Council completed their
internal audit of ACCESS as the Host Authority. The Audit included
an investigation to assess whether the ACCESS Support Unit (ASU) is
effectively fulfilling its responsibilities to the ACCESS pool and,
by extension, give assurance that the Essex County Council is
fulfilling its responsibilities as Accountable Body for the
ASU.
10.15
An initial audit was conducted
during the summer of 2020, with a final report completed in
November 2020 and presented to the Joint Committee at the virtual
meeting on 13 January 2021. The opinion given by the auditor at
that time was one of ‘Good Assurance’, the highest
rating available, with no issues raised and a single recommendation
to complete specific governance matters.
10.16
It was agreed that Internal Auditors
from the ACCESS Authorities would be invited to contribute to the
structure of the follow-up audit scheduled for the summer of 2021.
The audit commenced on 6 August 2021 and the ASU provided the
evidence and explanations sought in the discovery document.
Following initial feedback, the ASU engaged in structured dialogue
throughout the duration of the three-month inspection.
10.17
A draft report was issued to the ASU
on 18 October 2021. This contained a single recommendation covering
a number of points relating to best practice in respect of the new
Risk Management assessment and reporting process that was
introduced to Members at the Joint Committee meeting on 25 June
2021.
10.18
The ASU agreed to implement these by
28 February 2022 and had achieved this to the satisfaction of the
Auditor by the time that the final report was published on 2
December 2021. The opinion given by the auditor was again one of
‘Good Assurance’.
11.
Conclusion and
reasons for recommendation
11.1.
Investments are
regularly monitored to ensure that the Fund’s strategic asset
allocation set out in the Fund’s Investment Strategy
Statement (ISS) is being complied with and to keep the Committee
informed of any significant concerns with the investment managers,
retained to implement the Fund’s strategic asset allocation.
The Committee is recommended to note this report and agree the
proposed amendments to the implementation plan for the investment
strategy; and agree for officers to submit a Stewardship Report to
the FRC before 31 October
2022.
