Agenda item

47.1     The Committee considered a report introduced by Sian Kunert and Andrew Singh who drew the Committees attention to the following points:

1)    The Investment work plan sets out plan for next 12 months

2)    Due to the timing of the November meeting the usual Quarterly Performance Report for Q3 2023 is not ready. Isio have provided a summarised version of the report for Pension Committee attached as Appendix 2 of the report.

3)    The Quarterly performance report was disappointing and the response and plans covered in the report.

4)    Interest rates have been rising, the last two chances to increase have been held and inflation is reducing however the Bank of England will keep interest rates high to support this and markets have now accepted this.

5)    The various credit mandates posted mixed results in both absolute and relative terms as UK Gilt yields rose and spreads widened by varying degrees across credit sectors.

6)    A number of the benchmarks are linked to interest rates and inflation so benchmarks are structurally higher and returns haven’t kept pace

7)    The longer term returns at Fund level remain robust, with private equity assets adding significant value.

8)    The private equity mandates have delivered very strong performance over the 3 and 5 year periods, however the performance has been largely negative over the last 12 months, however we saw an upturn in the most recent quarter.

9)    UK equities performed well, largely driven by the energy market, with the sector benefitting from a rise in the oil price.

10)An allocation to private credit needs to be implemented and more information will come to the Committee.

11)UBS Infrastructure is of concern given the very weak performance which was driven by one particular investment, Archmore Fund I. Osmosis and Storebrand showed an unusual level of underperformance and more detail will be provided in the next report to Committee.

12)Sustainable mandates have underperformed but this is common, WHEB and Wellington are both high conviction and therefore can be impacted by the performance of one holding.

13)The benchmark of the current asset allocation of the Fund has now been updated following the strategy day.            

14)More recent acquisitions are judged against a different benchmark which makes it hard judge performance consistently. Some funds are thematic which makes it hard to measure them against traditional benchmarks the consultants were asked to look into suitable benchmarks for performance monitoring.

15)There are a variety of ESG mandates on the market with more expected, driven by assumption that this will be the default way to invest. If ESG is well managed then it has the ability to add value.

16)This is a diversified portfolio so not everything will do well at the same time; the focus is on good long term performance e.g. Baillie Gifford have now recovered from a challenging period. Rational is that asset allocation is key as this dictates performance.

17)The Carbon Foot printing data was previously produced by a difficult company so it is very difficult to compare data however the Committee should have sight of it. In future some analysis of the data will be provided with the report but hard to demonstrate the position of the Fund. ISIO will also ask managers for better data on this so that the Committee can better understand the context of what companies are doing to become more sustainable.

47.2     The Committee REVOLVED to note the investment report.