Agenda and minutes

Apologies for absence were received from Councillors Anna Burrage and Shiva Tiwari.

Apologies for lateness was received from Councillor Jenny Mulholland.

To note the Terms of Reference of the Pension Committee

The Chair, Councillor Madlani, suggested that the Committee’s terms of reference should be updated to include reference to its investment beliefs under the strategy as a guide to its approach to markets, asset allocation and investing in general. He asked that officers consider proposals as to how this could be included in the Committee’s terms of reference. The Committee agreed to the Chair’s suggestion.

ACTION BY: Legal officer / Executive Director Corporate Services

The Chair also informed the Committee that Trade Union Observers had been elected to the Committee, although they were not in attendance for this meeting, he welcomed Kathy Anifowose (Camden Unison) Jacqueline Wallace (Camden Unison substitute) and Errol Ghanie (Camden GMB) as the Committee Union Observers.

RESOLVED –

(i)         THAT the Terms of Reference of the Pension Committee be noted; and

(ii)        THAT the Terms of Reference be amended to reflect the Pension Committee’s commitment to Investment Beliefs.

There were none.

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.

Broadcast of the meeting

The Chair to announce the following: ‘In addition to the rights by law that the public and press have to record this meeting, I would like to remind everyone that this meeting is being broadcast live by the Council to the Internet and can be viewed on our website for twelve months after the meeting. After that time, webcasts are archived and can be made available upon request.

If you have asked to address the meeting, you are deemed to be consenting to having your contributions recorded and broadcast, including video when switched on, and to the use of those sound recordings and images for webcasting and/or training purposes.’

Any other announcements

Broadcast of the meeting

The Chair announced that “In addition to the rights by law that the public and press had 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 Council’s 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 Committee room 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.”

Committee Membership

The Chair welcomed Councillors Matthew Kirk and Sylvia McNamara as newly appointed members to the Committee and noted that Councillor Heather Johnson had been appointed by Council as Vice Chair of the Committee. He had also nominated Councillor Johnson to the executive of the Local Authority Pension Fund Forum (LAPFF), informing members that they were welcome to attend the LAPFF meetings which normally took place during the daytime.

Supplementary Agenda

The Chair informed members that the Supplementary Agenda related to item 8 Performance Report on the main agenda.

Table 7 on page 38 of the main agenda had been amended due to corrections to the benchmark figures for the L&G Future World Global Passive Index. The amendments were highlighted in yellow for ease of reference.

There were none.

To approve as a correct record the Minutes of the meeting of the Pension Committee held on 1st March 2023.

RESOLVED –

THAT the minutes of the meeting of the Pension Committee held on 1st March 2023 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 31 March 2023.

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 31 March 2023.

The Committee noted in particular that:

·       This was the quarter that the US Silicon Valley Bank (SVB) and Credit Suisse ran into difficulties causing a general fall in asset prices.

·       Table 1 showed that while most markets had small positive returns in the quarter, however over the year many markets suffered losses including the FTSE all world, Asian and emerging market equities.

·       Index linked guilt properties and commodities were significantly off coupled with rampant inflationary pressures.

·       Table 2 showed the cash values and proportionate funds of all the Council mandates. The fund was now valued at £1.9bn which was slightly up on the quarter ending in December 2022.

·       The allocation showed a familiar pattern with equity in total forming 56% of all assets.

·       Table 3 showed Asset Class Allocations where weights were compared against target weights. All asset classes were within target weights.

·       Table 6 tracked the funds performance against expected target rate and showed that the fund returns were still significantly above expectations.

·       Table 7 showed that the return of the whole fund in the quarter was below 2.5% although this was positive, it was behind the target of 4.6%.

·       Harris did well relative to the target this quarter which was + 2.8%. Baillie Gifford equity fell just half a percent short of the target.

·       Baillie Gifford Diversified Growth Fund also performed better over the quarter +1.8%.

·       All Legal & General equities had tracked their benchmarks in the quarter and seen a small growth in value overall.

·       The property mandates, CBRE, Partners Group and Aviva all suffered heavy underperformance this quarter partly due to the way they were valued. Over the year the fund underperformed its target by -6.4% which was attributable to both the Baillie Gifford mandates, equity was behind by 5.8% while the Diversified Growth Fund was off by 2.3%.

·       The Multi Asset credit mandate run by both CQS and Pimco London CIV fund was behind target by -11.4% in the year and Aviva by -30.9%. In the 2-year time frame the fund was up +1.7%, over the longer time frame on an absolute basis it was up by 10.6% over 3 years and 8.7% since inception. The fund was significantly up when compared to the actuarial expectations.

Karen Shackleton, Independent Investment Advisor, updated the Committee on the outstanding actions that were requested from her at the last Committee meeting informing members that:

In relation to requesting from CQS the 40% of companies that did not have carbonisation targets, CQS were compiling the list and would be sending this to her shortly. This would be sent to officers to circulate to members when it was received.

With regards to the query around Amazon stocks being both growth and value at the same time, this had been discussed with Baillie Gifford who had  ...  view the full minutes text for item 8.

Report of the Executive Director Corporate Services

This report presents an update to the risk register for the Pension Fund, with an action plan stating how risks will be managed.

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

The Committee was informed that this:

·       was a regular report considered once a year. It was best practice that the fund maintained and kept under review a risk register that identified key risks that the Pension Fund faced in achieving its objectives, similar to what all the big funds did.

·       By considering risks and assessing their likelihood and impact the Fund could focus on what action was needed to manage them. The Fund’s Independent Investment Adviser and Actuary had been consulted and had fed into the register.

·       Appendix A to the report was the actual Risk Register. Amendments to the previous version of the Register were tracked in appendix A. Table 1 and paragraph 1.7 page 65 of the agenda shows how risks were measured, paragraph 1.6 rates the Red, Amber and Green (RAG).

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

·       Risk 1 - Fund assets fail to deliver, the control measure had changed, it was noted that one of the real values of the Risk Register was that it allowed for further consideration to be given as to what needed to be tweaked, some of which were very operational.

·       With regards to a question as to why the inflation risk had not moved, in discussion with the Actuary, they were of the view that the high spot on inflation had been reached and it was now coming back down. All liabilities were sterling dominated and were now on the downside. Inflation from the Pension Fund’s point of view was viewed from the benefit side, as salaries were also inflationary and employees were contributing more into the fund.

The Chair also highlighted that the risk relating to knowledge and understanding of members could be reduced by encouraging members to take up the training available for members.

RESOLVED -

THAT the Risk Register be agreed as set out in Appendix 1.

ACTION BY: Executive Director Corporate Services

Report of the Executive Director Corporate Services

This report presents the results of an investment strategy review by our Investment Consultant, Isio, on the Fund’s strategic asset allocation.

Consideration was given to the report of the Executive Director Corporate Services, which presented the results of a detailed review of the Fund’s investment strategy.

The Committee noted that:

·       The Investment Strategy was last reviewed in July 202 with an interim review being conducted in July 2021.

·       The ISIO Investment Consultant led the Investment Strategy Review.

·       Underpinning the Investment Strategy were the Investment Beliefs which were set out in section 2 of the report.

·       The original beliefs (Table 1 of the report) were framed in November 2019 and were reviewed with the Independent Advisor in October 2022. They were produced from the United Nations Sustainable Development goals shown in Table 2 of which there were 17.

·       Beliefs were grouped into 3 principal areas, Environment, Social and Governance with the headline goal in each one being the big ones.

·       Table 3 sets out the goals in each which has the headline goals as Climate Action, Sustainable Cities and Communities, Good Health and Wealth Being and Inequalities.

·       ISIO were asked to consider the investment strategy and the goals which underpinned it.

·       The fund also had a number of financial beliefs which were set out in paragraph 2.9 of the report.

·       Section 3 of the report provided a context of the where the Fund was situated in comparison to other Funds, there strategic asset allocation and context, with the benchmarking data used to produce this context.

·       Section 3 also provided an update on the fund’s performance compared to the 63 other LGPS funds.

·       Broadly showing that the fund had delivered average results in 2021/22 and 2022/23 with the volatility giving various results over different time frames.

·       Section 4 of the report advises of the work ISIO had completed on the Investment Strategy Review.

·       Equity risk and inflation risk were the largest risks to the fund and the proposal was to move away from equity and increase inflation protection and long lease property.

·       The Committee recognised that the Fund’s asset allocation was one of the most important decisions it would make. It noted that performance analysis consistently showed that asset allocation was the main driver of Fund performance. Individual managers within each asset allocation were important, but not as important as the overall strategy and asset allocation. Furthermore, the fit and nature of asset classes was important for funds to ensure they had liquid assets to finance spend on benefits as they fell due.

The Chair informed new members of the Committee that a workshop on investment beliefs with the Committee had been conducted in the last year facilitated by the Independent Advisor.

Andrew Singh (Isio), Mark Irish (ESG Consultant) and Christopher Osbourne, Senior Portfolio Manager, London CIV were in attendance and talked about the ESG considerations, Affordable Housing new asset class and the proposed direction of travel informing the Committee that:

·       The Executive Summary and key recommendations on page 115 of the agenda highlighted one of the most important pieces of work done on the strategic assets and analysed the key risks to  ...  view the full minutes text for item 10.

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. This work is important to the Fund’s ambition to be a fully engaged investor and demonstrates its commitment to Responsible Investment and engagement in Environmental, Social and Governance (ESG) issues as the Fund works to maximise returns on investment.

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:

·       There was a recent business meeting details of which would be reported to the Pensions Committee meeting in September.

·       At the business meeting on 19^th April 2023, items discussed included energy companies and the cost-of-living crisis, the work force disclosure initiative, the work plan and the quarterly engagement report.

·       Table 3 showed the Pension Fund’s equity holdings across all the companies that LAPFF engaged with. The largest holding engaged with was Amazon.

·       Appendix A was LAPFF’s quarterly engagement report and appendix B was the Pension Fund’s voting policy.

·       LAPFF held their media conference after their business meeting in July which he and the Vice Chair of the Pensions Committee attended.

·       There were items on modern day slavery, linking climate Metrix to executive pay, litigation and the ESG backlash in the USA.

·       There was an ongoing discussion with managers about modern day slavery and how they enforced this with investment companies. Details of this would be published on the Pension Fund’s website.

·       The Pension Committee would receive an agenda item in September on BHP investor litigation relating to fatalities caused by collapsing of a mine in Brazil.

The Vice Chair commenting on her role as the Committee’s representative on LAPFF informed members that she had attended engagement meetings with Nestle and Adidas and it was a useful and important piece of work that was being carried out as shareholders also noting the difficult choices the Pension Committee was required to make regarding investment decisions. She also advised that the newsletters and information provided by PIRC Consultants was useful.

A member commenting on modern slavery informed the Committee that the Council earlier this year had past the charter against Modern Day Slavery which also talked about contractors and suppliers noting that it might be worth looking at that.

The Chair informed Committee members of the LAPFF engagement meetings encouraging them to attend at least one as it was useful information. The next meeting was scheduled for 4^th October and was likely to be a hybrid meeting.

RESOLVED -

THAT the contents of the report be noted.

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:

·       The government had recently initiated consultation about LGPS and next steps on investment, views on asset pooling and levelling up and private equities. The government was keen to accelerate and expand pooling.

·       As of 30 April 2023, the total assets deemed pooled by Client Funds stood at £26.7 billion, of which £13.0 billion were public markets (Authorised Contractual Scheme (ACS)) funds in Assets Under Management (AUM) managed by London CIV

·       £12.4 billion in passive equity funds. £1.3 billion had been drawn in respect of Private Market funds, with a further £2.4 billion committed.

·       3 funds were undergoing enhanced monitoring, LCIV Global Equity Focus Fund (Longview) had their next review in progress now. LCIV Global Total Return Fund (Pyrford) and LCIV Diversified Growth Fund (DGF) (Baillie Gifford) were also undergoing enhanced monitoring with their next reviews booked in for June 2023.

·       The other 13 LCIV funds were undergoing normal Monitoring. 3 have had in-depth reviews completed, namely LCIV Alternative Credit Fund, LCIV MAC Fund, and LCIV Global Equity Fund. LCIV Global Alpha Growth Fund, LCIV Global Alpha Growth Paris Aligned Fund, and LCIV Passive Equity Progressive Paris Aligned Fund all had reviews pending.

Sylvia Martin, Calculations Manager London CIV attended the meeting and informed the Committee that:

·       If new Committee members were interested in knowing more about the pool to get in touch with the Head of Treasury and Financial Services who could facilitate a visit to their officers where she was happy to host them to explain what they did.

·       Further to the meeting with the Diversified Growth Fund Manager (Baillie Gifford) in June 2023, regarding the Diversified Growth Fund, there would be a report recommending that the Diversified Growth Strategy be kept under enhanced monitoring status.

·        Investors would be invited to a due diligence webinar with the Fund Manager. After the webinar investors would be invited to share the findings of the fund monitoring and to explain how the Fund Manager was monitored against 8 different scoring criteria.

·       Investment in the Infrastructure Fund. £106m had been committed to Infrastructure Fund in 2019, 65% of the commitment invested which was about £69m about 45% of this was already invested in renewable infrastructure.

·       96% of this investment was committed to underlying funds, Stepstone the manager appointed to do due diligence and allocate the assets was not doing all the work at the moment. Therefore a 35% reduced fee had been negotiated as a full service was not being provided. This would be reviewed every quarter. It was a rolling 12-month contract.

In relation to a  ...  view the full minutes text for item 12.

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.

The Head of Treasury and Financial Services informed members that a number of items for the future work plan would come from the Investment Review Strategy such as, Affordable Housing and Infrastructure.

He reminded members that It was important that they prioritised training via the Hymans online portal. Informing members that other topics covered included Scheme governance, risk management, record keeping, annual benefit statements, reporting breaches, pensions dashboards, climate change, tPR codes of practice and enforcement, and equality and diversity.

Members noted that the CBRE and Partners Managers meeting was on 22^nd February 2024 rather than 2023.

RESOLVED –

THAT the contents of the report be noted.