Agenda item

4.1       MK explained that the planned PC strategy session was an annual deep-dive focusing on investment performance over the past year. The session also presented a training opportunity in terms of what makes an effective pension fund, with expert independent input. In general, performance over the past 12 months has been good, but PC members will still need to decide whether the fund needs to change its strategy. This may involve opting to receive additional training in order to better understanding some investment options (e.g. property) before making decisions on the strategy. The PC may also take the opportunity to exit agreements with specific Investment managers.

4.2       The Chair noted that he was encouraged by recent fund performance, and by the percentage of the Pension Fund that was actually funded. He also found it refreshing that so much of the debate around the East Sussex fund was conducted in public, including the PC strategy session, which PB members could attend should they wish. This openness is in contrast to the way in which many other Local Government schemes are managed.

4.3       Sue McHugh (SM) asked how the ultimate aims of the fund are agreed. MK told members that this is via the strategy. The degree to which the strategy needs to be altered will depend on the fund’s performance. Given the recent good performance, there may be relatively little need to make major changes, although decisions may well need to be made around crystallising recent gains. Employers are consulted on strategic issues via the annual Employers’ Forum, but there is also a key role to be played by employer representatives on the PB.

4.4       SM questioned whether PB, and hence employer representatives sitting as PB members, would have an input into any plans to vary the strategy. MK noted that PC was the decision-making body in terms of the strategy, although she was not anticipating any fundamental changes being made. However, MK recognised that it was important to engage with employers. In the future these may include offering the opportunity for employers within the scheme to adopt differing investment strategies. The Cheshire LGPS is currently exploring this idea, although it would inevitably lead to increased Investment fees.

4.5       SM noted that she did not think it was the case that employer objectives were out of line with the fund strategy, but it would be helpful to have a more explicit understanding of how the fund calculated and managed risk both in the short and longer term. DZ echoed this.

4.6       The Chair added that there was a significant employer interest in the triennial actuarial evaluation also. This was particularly so because an individual employer’s pension deficit might be very different from the liability profile of the entire fund, meaning that their preferred investment strategy might be at odds with that of the best strategy for the fund as a whole.

4.7       Angie Embury (AE) asked whether PC members were trained to make these key strategic decisions. MK told the Board that there was a considerable body of experience on the PC, and that this would be reinforced by additional training, but during and around the strategy event. The Chair added that the PC also had access to independent expert input from Hymans.

4.8       BR queried why the training event was public when it had previously been flagged as a private session. MK responded that it had been decided to run this year’s session in public, but other options might be explored for future events.

4.9       DZ stated that, although recent performance has been good, longer term performance has been less impressive. It is important to recognise this, given the long term nature of the Pension Fund. MK agreed, adding that the key point was why performance had improved in recent years. OO pointed out that the fund was now working with a more diverse group of Investment Managers than in previous years.

4.10     Cllr Kevin Allen (KA) asked how it could be that the fund was consistently outperforming against its benchmark, but underperforming when compared with the ‘Local Authority Universe’? MK responded that it must be borne in mind that the East Sussex fund is well-funded in comparison with most LGPS funds. Consequently, the East Sussex fund takes fewer investment risks than other funds, which may well result in lower than average returns in years where higher risk investment choices have tended to be successful. Measuring performance against the benchmark or against other LGPS schemes may therefore be less relevant than assessing performance against the fund’s strategic objectives.

4.11     Considering the statistical information included in the presentations for PC, PB members noted that some of the data was hard to understand, particularly so for graphs with unlabelled axes. SM remarked that it was difficult for PB to advise PC when PB members could not possibly comprehend the data in question. The Chair recognised that PB was looking at presentation slides rather than the full presentation, and that there would almost certainly be additional explanation provided during the actual presentations to PC. However, in future, it was important that material to be shared with PB was presented in a more accessible format (e.g. that graphs were correctly labelled). Officers agreed to work with external advisors to ensure that this was the case with future presentations.