Agenda and minutes

To agree the procedures for the operation of hybrid meetings.

RESOLVED –

THAT the Council’s procedure rules for hybrid meetings be agreed.

Apologies for absence were received from Councillor Shiva Tiwari.

There were no declarations.

Broadcast of the meeting

The Chair announced that “In addition to the rights by law that the public and press have to record this meeting, he reminded everyone that the meeting was being broadcast live by the Council to the Internet and could be viewed on the website for twelve months after the meeting. After that time, webcasts were archived and could be made available upon request. 

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If you were seated in the Chamber or participating via Teams, you were deemed to be consenting to having your contributions recorded and broadcast, and to the use of those sound recordings and images for webcasting and/or training purposes.”

Congratulations

Councillor Heather Johnson was congratulated on being Co-opted to the Local Authority Pension Fund Forum Committee (LAPFF).

Requests to speak at the Committee on a matter within its terms of reference must be made in writing to the clerk named on the front of this agenda by 5pm two working days before the meeting.

There were none.

There were no urgent items.

To approve as a correct record the Minutes of the meeting of the Pension Committee held on 21^st September 2022.

RESOLVED –

THAT the minutes of the meeting of the Pension Committee held on 21st September 2022 be approved and signed as a correct record.

Report of the Executive Director Corporate Services

This report presents the performance of the Pension Fund investment portfolio and that of the individual investment managers for the quarter ended 30 September 2022.

Consideration was given to the report of the Executive Director Corporate Services.

The Committee noted the performance of the Camden Pension Fund investment portfolio and the individual investment managers for the quarter ended 30 September 2022.

The Committee noted in particular that:

·       Financial Market Returns for the quarter, as had been the case for the previous quarter, seen poor performance across the board due to reasons previously highlighted including, worsening inflation, interest rate hikes and rising fears of recession in many other sectors. Global equity bond markets, as in previous quarters, had also seen further losses across the board which had resulted in a broadly flat quarter for the fund as a whole with a slight uptick in total portfolio values by 0.2%.

·       As was the case in the last quarter, all equity markets continued to be negatively impacted by the ongoing war in Ukraine, continued lockdowns in China leading to supply chain disruptions and climbing rates of inflation – and with those, increasing interest rates. Corporate and government bond indices sharply declined following rate rises.

·       The US dollar had strengthened further in light of anticipated market risks, which would affect emerging markets further. Consumer Price Index in the UK was expected to reach 11%, which in turn would limit economic growth.

·       Real assets had begun to fall in value after strong showings in previous quarters. Property and commodities remained very volatile with increasing evidence of a slowdown in British house prices, and in global commercial property. Commodity prices, especially for energy had fluctuated this quarter, and in many cases had declined from their first-quarter highs; however, the drivers behind high commodity prices, such as supply-side issues caused by war, and inflation, remained.

·       Table 2 in the report provided the value of the assets held by each investment manager. The portfolio had a market value of £1.89bn as of 30 September 2022, which represented a decrease of 0.03%, or £53m over the quarter.

·       Table 7 showed the individual investment manager returns and performance over the past year. Some of the managers had performed relatively well this quarter, while some others had performed poorly when comparing them to the benchmarks. There had been concerns about Baillie Gifford details of which were highlighted in the report paragraph 4.8 -4.10. They had underperformed by -4.7% against the benchmark since inception which was a concern.

·       With property there had been some good returns with CBRE and Partners which showed returns as at the end of June. Expert opinion and prediction had indicated that the property market was no longer rising and there was a likelihood that these returns would not continue. Harbourvest the private equity manager had shown double digit returns in previous quarters and were still outperforming by 22.1% over the year. However, they had underperformed their benchmark by -0.6% in quarter two which appeared to indicate the first sign of slowdown in their hitherto high performing results.

·       At the last Committee meeting, members asked about exposure to Russian assets in the light  ...  view the full minutes text for item 8.

Report of the Executive Director Corporate Services.

This report presents the results of an exercise to estimate the Fund’s maturity (the balance between benefits paid and contributions received). When payments exceed receipts the Fund is considered to be mature.

This report has an appendix, which contains information exempt within the meaning of Schedule 12A to the Local Government Act 1972 and is not for publication. The appendix has, therefore, been circulated to Committee Members only.

If the Committee wishes to discuss the contents of a closed exempt appendix it may pass the proposed resolution identified at the end of the agenda to exclude members of the public and the press from the proceedings for that discussion.

Consideration was given to a report of the Executive Director Corporate Services.

The Committee was informed that the Fund Maturity report was normally taken after the Triennial Valuation as it provided an accurate view of the liabilities of the fund.

It was noted that:

·       Many Pension Funds across the Country were becoming more mature which meant that contributions from employers and employees were less than the expenditure on benefits and expenses paid out to members of the fund.

·       This normally happened when there were fewer employees that contributed to the fund and more outgoings paid to pensioners.

·       When the Pension Fund was more mature the assets were required to be structured in a different way to generate cash quickly to meet shortfalls in annual revenue spend.

·       The picture for Camden’s Pension Fund was that it was broadly in a neutral position which meant that it was not required to change the structure of assets.

·       The Scheme Advisory Board Statement had been issued in early October which advised funds to have regard to long term stability when considering reductions in employer contributions and setting of discount rates to be set at prudent levels.

Barry Dodds from Hymans Robertson, the Actuary, attended the meeting and summarised the findings in his 2022 report, as attached at Appendix A, and as follows:

·       Cashflow maturity was generally about the money that was being received mostly from employers and members compared to what was being paid out in benefits every year.

·       What was not being considered was investment income from assets being held. That could further be considered after looking at the current position to determine whether more income was required if needed.

·       The methodology used to determine what might be paid out of the fund over the coming years was the same used for the valuation. The various assumptions used were inflation and life expectancy.

·       Cash flow negativity mattered in determining whether there were enough liquid assets to pay the benefits. The assets were there to pay the benefits, so it was not necessarily a bad thing to liquidate assets as that was what they were there for.

·       The chart on the restricted part of the agenda showed the recent cash flow position over the last 2 years. The chart from 2022 showed a significant transfer to the IDEA fund. The cashflow position had remained positive.

·       When projecting into the future, consideration was given to outgoings and income that could be expected over the coming 20years.

·       The baseline projections were the same assumptions used for the valuation which were long term flat assumptions used for the funding level.

·       The results broadly showed a neutral position for the next 20years, which meant that the fund would not be straying too far into paying out more than it was getting in at any point in time.

·       A few inflationary scenarios were considered. The recession scenario – which was a high inflationary environment in the short term, with inflation coming down in the medium to long term below  ...  view the full minutes text for item 9.

Report of the Executive Director Corporate Services.

This report presents the findings from Club Vita on the Fund’s longevity experience.

Consideration was given to the report of the Executive Director Corporate Services.

The Committee noted that:

·       Longevity (how long pensioners lived and future expectations) was a key determinant of pension fund liabilities. The higher pensioner life expectancy was, the greater a Fund’s liabilities were (pensions paid over a longer timeframe from retirement).

·       When placing a value on the Fund’s liabilities actuaries made general assumptions about the workforce and longevity based on national data. Club Vita (a sister company of Hymans Robertson the Council’s actuarial consultant) looked at Camden Pension Fund’s membership’s expected longevity and not just the national experience.

·       Data was drawn from 244 funds’ experiences with 3.2 million members across the UK. The total fund liabilities were built up by analysing data on individual members of the Fund to build an overall picture.

·       This report presented the key findings of the latest Club Vita report (with Hymans’ report forming Appendix A).

Jill Gallagher, Club Vita attended to present the findings from Club Vita on the Fund’s longevity experience and highlighted the following points:

·       There were two key factors determining the lifespan of individuals from the range of life expectancies for the different members in the fund.

·       Liabilities sat with those with longer than average life expectancies.

·       Most liabilities were dominated by those living in longer lived more affluent post codes and those high affluence higher salary pension members.

·       This analysis called VitaCurves was updated every year.

·       The latest version of these curves considered data up till the end of 2020.

·       The version used by the Actuary smoothed out the effects from the pandemic which meant that excess deaths from covid were not factored into the projection of life expectancy

·       Camden Pension Fund liabilities were assessed to decrease by 0.1% compared to the assumptions used in the Triennial valuation.

·       Future longevity trends considered what had happened in recent times before thought was put into what could happen in 20- or 30-years’ time.

·       For life expectancies there were two quite distinct periods.

·       From the year 2000 there were steady increases in life expectancy for both men and women due to an improvement in treatment for heart disease and people stopped smoking which came through in the data.

·       From 2010 this steady increase started to tail off for men and women even before covid.

·       Different patterns came through when broken down into different socio and economic groups.

·       With the most affluent being the most resilient to the slow down in life expectancy while those hard pressed in the fund did not experience the same resilience.

·       While information about covid was still being gathered, the early data indicated that the more affluent individuals had also been more resilient to the pandemic.

·       It was important for Pension Funds to understand the demographic and social economic profile of their membership when starting to project mortality rates and life expectancies into the future.

·       Club Vita split Pension Fund members into three groups – the hard-pressed, the comfortable affluent group and the group in between, the  ...  view the full minutes text for item 10.

Report of the Executive Director Corporate Services.

This report sets out revisions to the Funding Strategy Statement (FSS) which establishes how scheme employers in the Pension Fund are treated. It sets out how employer liabilities are measured, the pace at which these liabilities are funded and how employers or pools within the Fund pay for their liabilities.

This report has an appendix, which contains information exempt within the meaning of Schedule 12A to the Local Government Act 1972 and is not for publication. The appendix has, therefore, been circulated to Committee Members only.

If the Committee wishes to discuss the contents of a closed exempt appendix it may pass the proposed resolution identified at the end of the agenda to exclude members of the public and the press from the proceedings for that discussion.

Consideration was given to a report of the Executive Director Corporate Services.

The Chair highlighted to members that there was a part II not for publication exempt appendix B to the report which contained Hymans intellectual property. Hymans were happy to respond to questions in the public part of the meeting but did not want to share how the calculations were arrived at publicly.

The Head of Treasury Management and Barry Dodds, from Hyman Robertson, the Pension Fund’s actuary presented and summarised the main points in the Actuary’s report which was attached at Appendix A.

It was noted that:

·       The draft FSS was circulated to employers in the Fund for consultation on 8^th November, the consultation exercise closed yesterday and no comments had been received.

·       It set out revisions to the Funding Strategy Statement (FSS) which established how scheme employers in the Pension Fund were treated. It set out how employer liabilities were measured, the pace at which these liabilities were funded and how employers or pools within the Fund paid for their liabilities.

·       It was a very important statement from an employer’s perspective and for other stakeholders to look at how the fund was being run.

·       There was a requirement to review the FSS which was normally done every 3 years.

·       A review was carried out last year because of regulation changes which was required to be referenced within the document.

·       Due to the potential lack of response from employers the document was reduced to encourage engagement. It was made more readable, more user friendly so that employers and stakeholders were not required to consult on the whole strategy.

·       No substantial change was made to how the contribution rates were calculated, it was mainly presentational changes that were being made this time round.

·       The FSS was set out in Appendix A to the report and had been reviewed by the Fund’s Actuary, Hymans Robertson.

The following responses and comments were provided to Committee members questions:

·       With regards to section 5 and the criteria for academies joining the fund, it was anticipated that there would be a lot of school conversions to academies. The academies could not be prevented from joining the fund because the members already in the fund were moving from a local authority school to an academy setting where they would still have access to the LGPS.

·       Section 5 set out how their funding level was created to start off with and for joiners to the fund to take a share of any deficit that was there at the time of conversion, to provide security from the Fund’s perspective.

·       There were broadly three distinct categories of employer – the scheduled bodies whose employees by law had to be allowed into the fund if they wanted to. The Community Admission Bodies generally the not-for-profit charities that could be granted the right to participate in the LGPS at the Council’s discretion and then the transferee admitted bodies such as contractors that provided services for the Council. They had  ...  view the full minutes text for item 11.

Report of the Executive Director Corporate Services.

This report updates the employer register for all the admitted bodies in the Pension Fund and relevant data for the Committee to review in light of their funding positions and scheme status.

This report has an appendix, which contains information exempt within the meaning of Schedule 12A to the Local Government Act 1972 and is not for publication. The appendix has, therefore, been circulated to Committee Members only.

If the Committee wishes to discuss the contents of a closed exempt appendix it may pass the proposed resolution identified at the end of the agenda to exclude members of the public and the press from the proceedings for that discussion.

Consideration was given to a report of the Executive Director Corporate Services

The Committee noted that:

·       This report was considered each year and took a view on the status of each employer within the Fund, how well they were doing and whether they were likely to continue.

·       The Council made up 99.5% of the Fund while other admitted bodies comprised of .5% of the Fund’s overall liabilities.

·       The former second largest employer in the Fund, The Improvement and Development Agency had now left.

·       The Community Admission Bodies- small charities were the employers that were more likely to have the most difficulties because they had the most volatile income streams and the smallest number of members.

·       The appendix on page 155 set out the active, deferred and pension membership of the different employers. Some of which had very few active members remaining and were on the road to ceasing to be members of the Fund.

·       Consideration needed to be given as to how these members ceased to be members of the Fund which was set out in the Funding Strategy Statement.

·       Several of these employers had met with the Council to discuss their long-term futures within the Fund as their number of active members declined.

·       Since the last employer update the Council had met with Camden Citizen’s Advice Bureau and Holborn Community Association.

The following responses and comments were provided to Committee members questions:

·       A number of employers had either ceased being a member of the Fund or went bankrupt.

·       The LGPS scheme was an expensive scheme for a lot of charities to be involved in Particularly as it was expressly stated that the funding from donors could not be used to fund the pension scheme.

·       The individual members do not themselves leave the LGPS, they stay within the Fund which pays their pension.

·       An agreement was reached between and the employer and the Fund about how much money and how long a period the leaving employer can pay.

A member commented on the appendix highlighting that the format of the spreadsheet in the appendix was difficult to read.

RESOLVED –

THAT the contents of the report be noted.

Report of the Executive Director Corporate Services.

This report presents comparative analysis of the Fund’s investment managers’ performance on Environment, Social and Governance (ESG) issues against peers and national indicators.

Consideration was given to a report of the Executive Director Corporate Services.

The report presented comparative analysis of the Fund’s investment managers’ performance on Environment, Social and Governance (ESG) issues against peers and national indicators.

The Committee noted that:

-       the proportion of assets in fossil fuels had fallen from 12.81% in 2010 to 4.66% in 2020. At June 2022, the percentage equity holdings invested in fossil fuel related companies was 2.64%, across all assets it was 2.06%. This was a positive move towards the journey to net zero carbon economy.

-       With regard to United Nations Principle for Responsible Investment, (UNPRI) - all Fund’s investment managers were signatories to the UNPRI. Each signatory to the UNPRI was required to undergo an annual review which assessed how a participant had implemented the principles of UNPRI in their investment process. Table 2 showed the Fund manager’s UNPRI ratings.

-       Harris had an average score of 40 which was below the median for Strategy and Governance. Some of their low scores arose from not having their internal policies publicly disclosed on governance.

-       Table 3 regarding the gender pay gap and mean bonus gap, showed that there was a lot of work to do as manager’s were not meeting the national average and the mean bonus gap was even wider. There was an anomaly with Partners and officers were seeking more information regarding how they collected data as it seemed quite different from the others.

-       Table 4 showed the Board/Employee diversity. Some managers were doing well at Board level, but some would have to do a lot more to improve at Executive/senior management level.

It was agreed that officers on behalf of the Committee would write a letter to Harris requesting that they explain why they fell within the lower half of the PRI score on Strategy and Governance and what they planned to do about it.

ACTION BY: Executive Director Corporate Services.

It was noted that the Partners gender pay gap numbers appeared suspect, needed to be looked at more closely and clarity sought on the figures. The data from Stepstone and CQS had not yet been received, this would be circulated to members when received.

It was also agreed that officers on behalf of the Committee would write to Harbourvest regarding gender pay gap information, stating that although they were not legally required to compile this information, all the other Fund Managers were doing it and Camden Pension Fund required them to provide this information.

ACTION BY: Executive Director Corporate Services.

A member queried whether there was anything in the metrics that made Property and Infrastructure Fund Managers do better than other companies. Officers commented that in general the more specialist asset managers had fewer metrics to be compared against while equity managers were compared against 10 to 12 different models. It was also pointed out that a probable reason for this could be that the property managers were leaders in this area and the  ...  view the full minutes text for item 13.

Report of the Executive Director Corporate Services.

This report updates on the Carbon Footprint of the Pension Fund’s equity assets and also presents information on other asset classes.

This item was deferred to the next meeting.

Report of the Executive Director Corporate Services.

This report brings Members up to date with engagement activity undertaken by the Fund and on its behalf by LAPFF (the Local Authority Pension Fund Forum) since the last Committee meeting.

Consideration was given to a report of the Executive Director Corporate Services.

The Head of Treasury and Financial Services informed the Committee that this was a regular report presented to Committee Members updating them with engagement activity undertaken by the Fund and on its behalf by LAPFF (the Local Authority Pension Fund Forum). This work was important to the Fund’s ambition to be a fully engaged investor and demonstrated its commitment to Responsible Investment and engagement in Environmental, Social and Governance (ESG) issues as a way to achieve its objectives.

He also highlighted that:

·       LAPFF was a collaboration of 91 Pension Fund members from all over the Country. Kent County Council had also become a new member.

·       The LAPFF held regular meetings and as members of the Pension Committee they were welcome to attend meetings of the Forum. As a member of LAPFF the Fund was entitled to contribute to and participate in the work plan organised by the Forum around issues of common concern.

·       The LAPFF conference would be taking place next week, an update from the conference would be reported back at the next Pension Committee meeting in March.

·       Table 1 of the report provides information on the engagement that LAPFF undertook on behalf of Camden Pension Fund.

·       At the recent LAPFF Annual General Meeting Councillor Heather Johnson was Co-opted onto the LAPFF Executive. Camden had a voice at the top table influencing and steering what items to look at and getting involved in some of the campaigns.

·       The next LAPFF meeting was scheduled to take place on 25^th January. 2023.The Chair informed members that the Business meetings took place during the daytime, encouraging members to attend at least one of the meetings.

Councillor Johnson informed the Committee that she had attended the LAPFF’s Annual General Strategy meeting, commenting that it was interesting looking at the overall strategy of the organisation, how it was going to take things forward and whether their mission statement was still fit for purpose. She noted that LAPFF appeared to be taking diversity seriously but they had also acknowledged that there was still some way to go. She had also agreed to get engaged with Volvo.

A member queried again what efforts or steps had been taken by LAPFF to put pressure on Fund Managers to diversify away from Russian assets. Officers informed the Committee that as discussed earlier during consideration of the Performance report. LAPFF in the first quarter of the year when the item was first in the news had produced a report presenting the way in which Fund Managers should approach this issue. The performance report had also provided detail on assets that had tried to be sold where they could.

A member commented on the challenges regarding the situation in Ukraine noting that a question had been posed about whether the LAPFF should be looking at preparedness to be involved in providing arms to Ukraine.

Another member queried whether the Council could discuss with the LAPFF  ...  view the full minutes text for item 15.

Report of the Executive Director Corporate Services.

This report provides a quarterly update on developments at the London Collective Investment Vehicle (CIV) in creating sub-funds for the spectrum of asset classes, on-boarding of assets and development of the CIV’s staff resource. Progress with the London CIV contributes to the Government’s pooling agenda and drive to reduce costs in the Local Government Pension Scheme (LGPS).

Consideration was given to a report of the Executive Director Corporate Services.

This report provided a quarterly update on developments at the London Collective Investment Vehicle (CIV) in creating sub-funds for the spectrum of asset classes, on-boarding of assets and development of the CIV’s staff resource. Progress with the London CIV contributed to the Government’s pooling agenda and drive to reduce costs in the Local Government Pension Scheme (LGPS).

It was noted that:

·       There was not much to report in the quarter to September except that the transition of the MAC Fund to the two-manager structure with both CQS and Pimco was now complete and the London CIV Inflation Plus Fund managed by Aviva and in which Camden held £92m of assets had been renamed the LCIV Real Estate Long Income Fund.

RESOLVED –

THAT the contents of the report were noted.

Report of the Executive Director Corporate Services.

This report sets out items scheduled for future agendas of this Committee together with a record of training/ meetings attended and a list of future training opportunities.

Consideration was given to a report of the Executive Director Corporate Services.

The Committee noted the items scheduled for future agendas of this Committee together with a record of training/meetings attended and a list of future training opportunities.

It was noted that the Vice Chair had done some training, members were reminded that there was a need to demonstrate continuous learning and encouraged to take up available training opportunities.

RESOLVED –

THAT the contents of the report be noted.

There were none.