Agenda and minutes

Apologies for absence were received from Councillor Stephen Stark. Councillor Gio Spinella was attending in his place as a substitute member.

RESOLVED –

THAT Councillor Lorna Russell be elected as Vice Chair of the Committee for the 2018-2019 Municipal Year.

The Pension Committee’s Terms of Reference are attached for noting.

RESOLVED –

THAT the Pension Committee’s Terms of Reference be noted.

The following Committee Members made declarations for the sake of transparency:

Councillor Heather Johnson declared that she was a member so of the Pension Fund.

Councillor Madlani was a Board Member of UK Finance.

Councillor Awale Olad declared that he was a consultant at Deloitte LLP.

Councillor Lorna Russell declared that she was an Account Director and partner at Lansons and had dealings with Black Rock and the Phoenix Group.

Councillor Gio Spinella declared that he was a Customer Services Executive at Infopro Digital, a publishing company that deals with the press and was also a member of the Pension Fund.

Councillor Shiva Tiwari declared that he was an Associate Director of Mayfair Equity Partners which was a private equity fund.

There were no deputations.

There were no announcements.

There were no urgent items.

To approve and sign as a correct record the Part I minutes of the meeting of the Pensions Committee held on 8^th March 2018.

RESOLVED –

THAT the Part I minutes of the meeting held on 8^th March 2018 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 2018.

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

The Committee noted the performance of Camden Pension Fund investment portfolio and that of the individual investment managers for the quarter ended 31^st March 2018 (Quarter 1 of 2018).

The Committee noted in particular that:

·                Global financial markets continued to be positive in the opening three months of 2018, although at a slower pace than in recent quarters.

·                Volatility returned to the fore with investor sentiment being impacted initially by the path of interest rate rises in the US and, later on, concerns over trade.

·                The value of the assets held by each investment manager as at 31 December 2017 and 31 March 2018, the asset classes held, and the targets for each mandate. The portfolio had a market value of £1.581bn at 31 March 2018, compared with £1.630bn at 31 December 2017.

·                In order to estimate how the Fund’s liabilities were changing over time a proxy was calculated. Total fund liabilities were estimated to be £1.84bn as at 31 March 2018, with assets valued at £1.58bn giving a theoretical estimated funding ratio of 85.6%. The last full valuation was carried out based on March 2016 data and reported to Committee in September 2016. At the time, this showed a marginal improvement in funding to 76.2%, a 0.6% increase on the previous triennial valuation.

·                The proxy measure suggested liabilities had grown by 13% (or £208m) since the last valuation date. Although gilt yields were lower than at the time of the valuation (thereby increasing the present value of liabilities discounted by this rate), investment returns had been higher and assets had grown by £332m (or 27%) during the same timeframe.

Committee Members noted Appendix A “Camden Client Ranking by Manager” which detailed Camden’s exposure as clients to the overall fund or strategy managed by each Investment Manager. In future, where Camden represented greater than 5% of the Investment manager’s fund and there was a material increase due to client outflows, this would be reported to Committee on an exceptions basis.

The Committee also noted Appendix B, which presented a more comprehensive overview of the financial markets by the Independent Investment Advisor and reported the performance of the individual Investment Managers in more detail. Karen Shackleton, Independent Investment Advisor highlighted the salient points as follows:

a)            London CIV - Baillie Gifford – despite delivering a negative absolute return, this sub-fund outperformed Harris in Q1 2018 by +6.5%, and by +12.2% for the 12 months to Q1 2018. They also outperformed their benchmark by +2.9% for the quarter and +7.6% for the 12 months.

b)           Harris- Harris’ sector allocations had a positive impact, adding +0.44%. Unfortunately, this was more than offset by poor geographic asset allocations and poor stock selection. Only six stocks made positive contributions to the absolute return in Q1 2018. The remaining three stocks all delivered negative returns. As at the quarter end, the fund had a 55.4% allocation to Europe, 35.7% to the US,  ...  view the full minutes text for item 9.

Report of the Executive Director Corporate Services

This report details the pension fund cash flow and membership statistics for the previous year and over the longer term.

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

The Committee noted a quarterly analysis of the cash flow for the pension fund during the last year, and over the longer term, together with an analysis of the movement in scheme membership. It also noted that this report was received annually by Committee.

The Committee noted in particular that:

·         After investment income, the overall total net inflow to the Pension Fund in 2017/18 was £7.4m, an increase of £1.5m on 2016/17.

·         Cash flows associated with contributions and retirement pensions had been relatively stable over the last seven years. Lump sum and death grant payments were more volatile historically but were mostly flat in 2017-18.

·         The clearest trend over the years had been the increase in retirement pensions paid, caused by a combination of an increase in pensioners and an annual inflationary increase to payments.

·         While deferred membership and pensioner numbers continued to grow, active membership had tended to decline from a peak of 6,000 in 2004/05. This trend abated in 2013/14, and experienced an increase in 2017/18 to just over 5,000. 

In response to a question, the Head of Treasury and Financial Services explained that the Fund communicated with Members via an annual newsletter which was usually sent out in January. Officers were of the view that there was no benefit running annual workshops and mail shots were very expensive and again not very beneficial.

Councillor Madlani said that he would discuss this issue with officers prior to holding discussions with the Trade Unions.

            ACTION BY: Executive Director Corporate Services

RESOLVED –

THAT the contents of the report be noted.

Report of the Executive Director Corporate Services

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

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

The Committee noted the current position with regard to engagement activity undertaken by the Fund and LAPFF (the Local Authority Pension Fund Forum) since the last Committee meeting.

The first section of the report related to the LAPFF business meetings. LAPFF had 75 members who 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. A new stream of work proposed would be referred to the LAPFF executive to decide whether a scoping paper should be prepared for consideration and, if approved, that issue then becomes part of the work plan.

It was noted that the LAPFF policy on confidentiality required all company correspondence (letters and meeting notes) to remain confidential. However, LAPFF produced a quarterly engagement report to give an overview of the work undertaken, a copy of which was attached to the report at Appendix A and highlighted the achievements during the quarter. It also listed engagement undertaken with a number of companies. The companies the Fund held interests in was contained in Table 1 of the report on page 75.

The second part of the report covered Proxy Voting. It was noted that members of the Fund and other interested parties could access details via the Fund’s website with regard to how the Fund had voted at past shareholder meetings together with a summary of its voting policy. A total of 1,391 votes were cast during the quarter, across 109 meetings, details of which were contained in the report.

RESOLVED –

THAT the contents of the report be noted.

Report of the Executive Director Corporate Services

This report updates the Committee on the outcome of recent procurement exercises undertaken to appoint a Fund Actuary and an Investment Consultant. Following the appointments, the Committee will now receive actuarial advice led by Douglas Green of Hymans Robertson and investment consultancy led by Dave Lyons of KPMG.

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 the report of the Executive Director Corporate Services.

It was noted that there was a confidential appendix to this report containing confidential information relating to this item, which Committee Members had read and would take into account when making the decision. With regard to this appendix the head of Treasury and Financial Services informed the Committee that there was a typographical error on page 100, and the correct duration for the Investment Consultancy service should read “July 2018 to July 2022…”

The Committee noted the outcome of recent procurement exercises undertaken to appoint a Fund Actuary and an Investment Consultant. Following the appointments, the Committee would now receive actuarial advice led by Douglas Green of Hymans Robertson and investment consultancy led by Dave Lyons of KPMG. It was also noted that they would be reporting to and attending the November Committee 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 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 LGPS.

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

The Head of Treasury and Financial Services explained to the Committee that all LGPS Pension Funds in England and Wales were participating in the Government’s pooling agenda aimed at reducing investment costs, gaining economies of scale, improving governance and investing in infrastructure in the LGPS. Eight pools had been proposed by LGPS funds and the Government had agreed that these should all proceed to be established and regulated. In London all 33 of the London Borough Funds had joined the London CIV.

The Committee noted that it would receive quarterly reports on the establishment and progress of the London CIV and transfer of assets into it. This would assist the Committee in its responsibility of asset allocation whilst future procurement of funds and day to day management was now the responsibility of the London CIV.

The Committee noted the establishment and procurement of new sub-classes, launches of new sub-funds, assets under management and resource build-out at the CIV.

RESOLVED –

THAT the contents of the report be noted and Committee Members be asked to feedback any comments on progress to the Chair and officers.

ACTION BY: Committee Members

                                    Executive Director Corporate Services

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 Head of Treasury and Financial Services explained that the Risk Register identifies key risks that the Fund faces in achieving its objectives. By considering risks and assessing their likelihood and impact the Fund could focus on what action was needed to manage them.

As stated by the Pension Regulator, the LGPS needed to have good internal controls in order for it to be a well-run scheme and enable risks to the scheme to be managed effectively. The Fund must establish and operate adequate internal controls that enable them to manage risks that relate to their scheme and the Fund should have a process to identify, evaluate and manage risks on an ongoing basis. The register was one of the key ways the Scheme managed risks.

The risks were categorised under the following headings: Financial, Demographic, Regulatory, Governance and Administration. The Committee reviewed the updated Risk Register set out in Appendix 1 to the report, to ensure that:

·         Risks were relevant and accurately described

·         All risks were captured and any further risks were added to the register

·         Scores for likelihood and impact were appropriate

·         Risk treatment was adequate; and

·         Scores for residual likelihood and impact were appropriate.

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 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 the report of the Executive Director Corporate Services.

The Head of Treasury and Financial Services explained that this report set out items that were proposed to be included on the agendas for future meetings of the Committee, and details of training opportunities for Members and officers to plan to stay informed on upcoming topics. Councillor Madlani urged Members to attend training sessions as it was a large Fund to manage and some issues were difficult to understand. He suggested that they could ask the Head of Treasury and Financial Services or himself which sessions would be most useful for them to attend. Committee Members would be asked to feedback on any events they might attend.

It was agreed that the preferred start time of meetings with Investments Managers was 6.30 p.m.

With regard to Appendix 1, “Future Items for consideration by the Committee” on page 142, it was noted that “Employer Contribution Strategy”, currently scheduled for the meeting in November 2019 would be taken at the June 2019 meeting before the Triennial Valuation was considered.

It was noted that an item regarding “Performance Benchmark Review” would be added to the business plan for the November meeting.

            ACTION BY: Executive Director Corporate Services

RESOLVED –

THAT the contents of the report be noted.

There was no urgent business.

Proposed resolution:

THAT the press and public be excluded from the proceedings of the Pension Committee on 30^th July 2018 during consideration of the respective items on the agenda on the grounds that it is likely, in view of the nature of the business to be transacted, that were members of the public to be present, there would be disclosure of exempt information as defined in Schedule 12A to the Local Government Act 1972.

Specifically -

Publicity in respect of items12 and 18 would be likely to lead to the disclosure of information relating to the financial or business affairs of any particular person (including the authority holding that information) and not required to be registered under various statutes by virtue of Category 3 of Schedule 12A of the Local Government Act 1972. The Proper Officer has considered all the circumstances of the report and is of the view that on balance the public interest in maintaining the exemption outweighs the public interest in disclosing the information. The reasons why the public interest favours withholding the information are that the disclosure of the information is likely to prejudice the commercial interests of the Council and organisations engaged in commercial activities as the information relates to commercial activities that are conducted in a competitive environment.

RESOLVED –

THAT the press and public be excluded from the proceedings of the Pension Committee on 30^th July 2018 during consideration of the respective items on the agenda on the grounds that it is likely, in view of the nature of the business to be transacted, that were members of the public to be present, there would be disclosure of exempt information as defined in Schedule 12A to the Local Government Act 1972.

Specifically -

Publicity in respect of item 18 would be likely to lead to the disclosure of information relating to the financial or business affairs of any particular person (including the authority holding that information) and not required to be registered under various statutes by virtue of Category 3 of Schedule 12A of the Local Government Act 1972. The Proper Officer has considered all the circumstances of the report and is of the view that on balance the public interest in maintaining the exemption outweighs the public interest in disclosing the information. The reasons why the public interest favours withholding the information are that the disclosure of the information is likely to prejudice the commercial interests of the Council and organisations engaged in commercial activities as the information relates to commercial activities that are conducted in a competitive environment.

To approve and sign the Part II minutes of the meeting held on 8^th March 2018

RESOLVED –

THAT the Part II minutes of the meeting held on 8^th March 2018 be approved and signed as a correct record.