Agenda item

43.1       The Committee considered a report introduced by Russell Wood, Pensions Manager and Andrew Singh, ISIO.

43.2       The Committee’s discussion included the following key issues: 

1)    The Committee are asked to note that the United Nations Principles for Responsible Investment (PRI) is not accepting submissions in 2022, so the Fund’s first submission will be deferred until 2023.

2)    The Quarterly Performance Report for Q2 2022 and Q3 2022 are attached as Appendix 2 and 3. Since the last reported position, the valuation of the Fund has decreased from £4.7bn as at 31 March 2022 to £4.50bn as at 30 September 2022 (a decrease of £0.2bn). This is a small partial recovery from the unreported 30 June 2022 value of £4.49bn. This performance reflects a negative absolute return of 4.0% in the quarter to June and a positive absolute return of 0.2% in the quarter to September. The Fund marginally outperformed the benchmark in both periods.

3)    The fall in gilt values caused significant liquidity concerns for UK DB pension schemes. Most growth asset classifications have struggled with the market volatility. The Bank of England have given a strong statement and markets have been trying to find the best way to respond.

4)    The report details the increase in gilt yields and the upwards trend following the interest rate rise. The impact of the governments October 2022 Kwasi Kharteng mini-budget has largely passed.

5)    The Fund’s assets delivered a positive return over Q3, performance across the Fund’s mandates was predominantly positive with equity and infrastructure markets in particular increasing in value. Fixed income portfolios performed the least well due to rising interest rates.

6)    The outlook for the next 3 – 5 years is positive.

7)    Following the Committee’s agreement at the February 2022 meeting to appoint IFM to mandate, the Fund has successfully onboarded and estimated time to deployment to be in the region of 3-9 months.

8)    Schroders have had some staff changes, the impact of which will be monitored along with the property portfolio.

9)    It is sensible to review the overall asset allocation following the market volatility though there should be consideration given to the timing of implementing changes.

10) There will be a revised strategy for the Committee to consider in 2023 in response to the new valuation.
 

11) Sustainable funds have been affected by limited exposure to the energy sector.

12)Osmosis is not linked to a traditional market index but have a proprietary sustainable approach looking at companies who make the most efficient use of their resources. The returns will lag against the value of fossil fuel companies.

13) There was a discussion on what the performance of funds were being benchmarked against. The Committee would welcome any further data available in future to further illustrate the progress being made by each fund against its benchmarks.

14)The rebalancing policy is aimed at the liquid assets on a quarterly basis in a range set around the fund’s strategic asset valuation (ISIO give steer on range) and designed to work at a time of volatility.

15)The revised policy includes a proposal to give the CFO discretion to invest 5% of the portfolio outside of strategy in order to take advance of market situations as they occur, in addition to the emergency powers already in place.

43.3       The Committee RESOLVED to

1)    Note the investment report

2)    Approve the rebalancing policy