Agenda and minutes

To agree the Council’s procedure rules for remote meetings.

RESOLVED –

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

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 six months after the meeting. After that time, webcasts are archived and can be made available on DVD 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 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 six months after the meeting. After that time, webcasts are archived and can be made available on DVD 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.”

Investment manager meeting

The Chair thanked those Committee Members who had attended the Investment Manager meeting with Harris and L&G on 27^th May 2020.

It was noted that the next Investment Manager meeting with CBRE and Partners had been arranged to take place on Monday, 21^st September 2020 from 18:30 – 20:30.

Councillor Madlani also thanked those Committee Members who joined the Teams remote meeting with Club Vita on Longevity, which he considered to be a useful and thought provoking seminar.

Apologies for absence were received from Councillor Ranjit Singh.

Apologies were also received from Kathy Anifowose (Camden UNISON observer) and Naome Kyokushaba-Katsigazi (Camden GMB observer)

There were no declarations.

There were no deputations.

There were no urgent items.

To approve as a correct record the minutes of the meeting of the Pensions Committee held on 3^rd March 2020.

RESOLVED –

THAT the minutes of the meeting held on 3^rd March 2020 be approved 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 2020.

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 31st March 2020 (quarter 1 of 2020).

The Committee noted in particular that

·       The portfolio had a market value of £1.822bn at 31^st December 2019, compared with £1.557bn at 31^st March 2020, a fall of 14.5%. However, at Q2 2020, it was valued at £1.768bn, a fall of 3% from Q4 2019, although private equity and real estate had some uncertainty and time lags in their valuations.

·       The global pandemic and subsequent economic shutdown that occurred towards the end of Q1 2020, caused heavy falls across all equity indices, with the UK equity market performing the worst, as GDP fell by 5.8% in March (and later 20.4% in April, the worst monthly UK GDP falls ever recorded).

·       The FTSE 100 had its biggest fall since 1987 due to its sectoral composition, particularly its oil and gas exposure.

·       Financial stocks also fell in value but health care and technology sectors performed better.

·       Property only fell 1.4% in the quarter, but due to the lack of transactions, many valuation agents cite material uncertainty over property valuations. Associated rental incomes were likely to decrease over the next quarter too, so it remained to be seen whether property had performed better as an asset class.

·       Markets were volatile and a recovery had occurred in equity markets since the end of Q1 2020. However, the ultimate shape of the recovery depended upon the depth of economic scarring incurred and whether a second wave of the pandemic occurred.

·       The portfolio had a market value of £1.822bn at 31^st December 2019, compared with £1.557bn at 31^st March 2020, a fall of 14.5%. However, at Q2 2020, it was valued at £1.768bn, a fall of 3% from Q4 2019, although private equity and real estate had some uncertainty and time lags in their valuations.

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 Investment Managers. Where Camden represented more than 5% of each 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 – This sub-fund delivered a return of -13.20% in Q1, outperforming Harris by +13.6%, and by +15.3% for the 12 months to Q1 2020. They outperformed the performance target by +2.2% for the quarter and by +2.6% for the 12 months. Baillie Gifford’s 12-month performance, although negative in absolute terms, had been strong on a relative basis, beating the index by +2.6%.  ...  view the full minutes text for item 8.

Report of the Executive Director Corporate Services

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

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, which presented the results of a detailed review of the Fund’s investment strategy as a whole; to quantify the inherent risks and consider options for evolution of the strategy. The results of the review on non-equity portfolio was contained in Appendix A to the report and the results of the review on the equity portfolio were contained in Appendix B.

The Committee noted theadditional information on the non-equity portfolio review, which was attached at Appendix C to the report. This was a Part II appendix, as it contained commercially sensitive and confidential information and was, therefore, not available to the public. Committee Members confirmed that they had read the appendix and would take it into account when making the decision.

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 Committee noted that 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 reviews also proposed a more specific ESG focused allocation and to trim the active equity manager proportion of the Fund.

Committee Members were reminded that KPMG had consented to the management buyout of its UK pensions advisory wing which had been rebranded as Isio, the Fund’s Investment Consultant. Isio, had been commissioned to review the current Fund structure. The lead Partner, David O’Hara, was still responsible for the account, supported by Andrew Singh (as before) and Hermione Rigg. All three had been involved in the strategy review work.

David O'Hara (Partner), Patrick Race (Partner) and Hermione Rigg (Consultant) from Isio were present at the meeting. David O’Hara summarised the main findings of the reviews as follows:

·         The Fund’s investment strategy delivered strong asset returns in recent years. Over the period between the 2016 and 2019 Actuarial Valuations, most growth asset markets trended upwards which, along with contributions, delivered an increase in the funding position from 76% to 103%. Following significant market volatility over Q1 2020, some of this improvement had been given back. It was estimated that the funding level was around 93% as at 31 March 2020.

·         The objective was to deliver a return that achieved full funding with as little volatility as possible (to maintain stable contributions). The assumptions underlying the Actuary’s funding basis were important factors in determining the return requirement. As the Fund grows in absolute terms, it would also be important to ensure that stability, relative to sponsor budgets, was maintained.

·         At the March 2019  ...  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 a report of the Executive Director Corporate Services.

The Committee noted details of the pension fund cash flow and membership statistics for the previous year and over the longer term. It noted in particular that

·       The overall cash flow position was positive in 2019-20, which was in line with the previous year.

·       There was a slight slowdown in benefit payments in Q1 2020.

·       The membership continued to grow, from 21,913 to 22,583 members.

·        Pension numbers had increased due largely to auto-enrolment and the growth in Council employees as a result of insourcing.

·       Transfer values had increased as 12% of officers made up 50% of liabilities and it was mainly senior officers who were leaving.

·       Contributions made by both employers and employees had increased:

-      Employee contributions were governed by statute and related to the person’s salary. Auto- enrolment, and an increase in the number of employees were also factors

-      Employer contributions were set by the Actuary following the triennial valuation. Pensions were also tied to inflation.

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).

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 the 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).

The Committee noted the Fund Launch Plan and progress to date, which was attached at Appendix A to the report. This was a Part II appendix, as it contained commercially sensitive and confidential information and was, therefore, not available to the public. Committee Members confirmed that they had read the appendix and would take it into account when making the decision.

It was noted that a number of appointments had recently been made as follows:

-        Jason Fletcher had been appointed as the new permanent Chief Investment Officer (CIO). He would begin the role in July 2020, bringing with him over 25 years of experience in the financial services industry and a familiarity with the pooling environment. Kevin Corrigan would continue as interim CIO until Jason Fletcher starts.

-        Jacqueline Jackson had also been appointed as a new Head of Responsible Investment. This role would lead and develop Responsible Investment and to better understand ESG (environment, social, governance) requirements and expectations. She was also due to start in July.

-        Cameron McMullen joined LCIV as the new Client Relations Director on 14 April following Kevin Cullen’s retirement, who will remain at LCIV for a short handover period.

The Committee noted that Councillor Madlani had attended the recent LCIV AGM. He had expressed concern at the lack of diversity on the LCIV Board. He welcomed the appointment of Jacqueline Jackson and said that she would be invited to attend a future meeting of the Committee to outline her plans, which would be building on the work carried out by her predecessor, Dawn Turner.

RESOLVED –

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

                    ACTION BY: ALL

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 a report of the Executive Director Corporate Services.

The Committee noted an update to the risk register for the Pension Fund, with an action plan stating how risks would be managed. The Head of Treasury and Financial Services explained that the Risk Register identified key risks that the Fund faced 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.

With regard to the Risk Register set out in Appendix 1, it was noted that changes had been ‘tracked’ so new text or risks were shown underlined. Scores that had changed were also shown with tracked changes which helped to identify new changes and showed old text crossed through.

It was noted that following the triennial valuation and a changed basis for calculating the funding level old risk 4 – that ‘liabilities are no longer linked to gilt yields’ has been deleted as liabilities were now linked to investment returns with an expectation of a 70% likelihood of achieving returns of 4.5%.

Committee Members also noted that under demographic risks - risk 21 ‘Deteriorating active membership’ was not considered such an issue as active members were increasing, mainly due to auto enrollment and insourcing. The score had been reduced from 12 to 8 to reflect this.

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 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 a way to achieve its objectives.

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

The Committee noted the engagement activity undertaken by the Fund and on its behalf by LAPFF (the Local Authority Pension Fund Forum) since the last Committee meeting. It recognised that 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.

The report also summarised the LAPFF Quarterly engagement report along with its business meetings and included the PIRC voting data.

It was noted that as expected, the percentage of NAV in fossil fuels for equities remained low at 5%.

RESOLVED -

THAT the contents of this report be 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 a report on “Inflation Protection” would also be submitted to the November 2020 meeting.

The Chair informed the meeting that as a new member of the Committee Councillor Mulhullond would be receiving pension training. Committee Members were asked to inform the Head of Treasury and Financial Services if they wished to attend the meetings with Investment Managers or any training sessions, including refresher training.

TO NOTE: ALL

RESOLVED –

THAT the contents of the report be noted.

There was no urgent business.