Agenda and minutes

There were no apologies.

Vinothan Sangarapillai, Employee representative, declared for the sake of transparency that he was a member of the pension scheme.

Steve Worrall, Employer representative, declared for the sake of transparency that he worked for Veolia which was an admitted body.

(a)        Welcome to Steve Worrall

Steve Worrall, Pensions Technical Manager with Veolia had been appointed as an Employer representative on the Pension Board. Board Members welcomed him to his first Pension Board meeting.

(b)       London CIV CEO appointment

The Board noted that Mike O’Donnell, who had previously been the Executive Director Corporate Services at Camden, had been appointed as Chief Executive Officer (CEO) at the London CIV. Board Members congratulated him on his appointment.

(c)        ESG Seminar

The Pension Board noted that an ESG seminar would be held on 20^th March from 4pm to 8pm, to which all Pension Committee and Pension Board Members had been invited to attend.

(d)       Termination of meeting

Councillor Olszewski informed Board members that the meeting would need to end by 6pm as both he and Paul Dunphy had to attend a Cabinet Strategy meeting.

There were no urgent items.

To approve and sign the Part I minutes of the meeting held on 15^th October 2018.

RESOLVED –

THAT the Part I minutes of the meeting held on 15th October 2018 be approved and signed as a correct record.

Report of the Executive Director Corporate Services

The Pension Board has responsibility for assisting the Pension Committee in ensuring compliance with the Scheme Regulations, other legislation relating to governance and administration, and the requirements of the Pension Regulator. The Pension Board must also ensure the effective and efficient governance and administration of the scheme. This report summarises the items presented and decisions made at the Pension Committee meetings on 29 November 2018 and 27 February 2019.

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

The Head of Treasury and Financial Services presented the report which summarised the items presented and decisions made at the Pension Committee meetings on 29^th November 2018 and 27^th February 2019.

With regard to section 2 of the report, and the performance of managers, the Board noted that Standard Life had delivered an absolute return of 0.3% in Q3 against a target of +1.5%. The manager trailed its target over all time horizons and was behind since inception by 5.7%. The Pension Committee was aware that they had had another negative quarter and were continuing to monitor the situation.

RESOLVED –

THAT the contents of the report be noted.

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.

The Pension Committee considered this report at its meeting on 29 November 2018 and agree to the revised Funding Strategy Statement set out in Appendix A.

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

The Board noted that the report set out revisions to the Funding Strategy Statement (FSS) which established how scheme employers in the Pension Fund were treated. It showed 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. The Pension Committee considered this report at its meeting on 29^th November 2018 and agreed to the revised Funding Strategy Statement set out in Appendix A. It was noted that to aid review, amendments to the FSS were shown in track changes on Appendix A.

The Head of Treasury and Financial Services explained that this was a straight forward amendment to the previous FSS with a few things tidied up for changes with Government departments and the inclusion of the requirement to refund employers with trapped surpluses, mainly affecting Transferee Admission Bodies (contractors with the Council).

Steve Worrall raised a query relating to a contract issue rather than a pension issue. The Head of Treasury and Financial Services agreed to discuss it with him outside the meeting.

ACTION BY: Executive Director Corporate Services.

The Board noted that Coram had not agreed to the circulated FSS. They had not provided a reason for this and it was not obvious why they would disagree as the change gave employers a better participation basis (refunding of surpluses). Officers had tried to speak to them to discuss the issue but they had not responded.

RESOLVED –

THAT the report be noted.

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 Pension Committee to review in light of their funding positions and scheme status. The Committee noted the contents of the report at its meeting on 29^th November 2018.

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 Board wishes to discuss the contents of a closed exempt appendix it may pass the proposed resolution identified at the end of the document 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 Head of Treasury and Financial Services presented the report which updated 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. It was noted that the Employer Register was an annual report to the Pension Committee which included 30 scheme employers, charities and organisations which take on Council Services. The report monitored the risks they might impose.

The Pension Board noted that the report contained a Part II appendix which presented the employer register.  This was not for publication and in order for Board Members to discuss the content of the restricted appendix, it passed the following resolution:

RESOLVED –

THAT the press and public be excluded from the proceedings of the Pension Board on 13^th March 2019 during consideration of item 8 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 and that the public interest in maintaining the exemption outweighs the public interest in disclosing the information.

Specifically -

Publicity in respect of item 8 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) by virtue of Category 3 of Schedule 12A of the Local Government Act 1972.

PART II

The Pension Board discussed the contents of the confidential appendix to the report as detailed in the restricted part of these minutes.

PART I

Having discussed the content of the confidential appendix, the Pension Board returned to open session.

It was noted that the Pension Committee had noted the contents of the report at its meeting on 29^th November 2018.

RESOLVED –

THAT the contents of the report be noted.

Report of the Executive Director Corporate Services

This report sets out a proposal from the Council, as the major employer in the Fund, to prepay its secondary contributions early.

The Pension Committee, at its meeting on 29^th November 2018 agreed that the Council can prepay its secondary contributions as set out in section 2 of the report.

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 Board wishes to discuss the contents of a closed exempt appendix it may pass the proposed resolution identified at the end of the document 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 Pension Committee, at its meeting on 29^th November 2018 agreed that the Council could prepay its secondary contributions, as set out in section 2 of the report.

The Pension Board noted that the Funding Strategy Statement (FSS), which governed how employers made contributions to the Fund, allowed for the Council (under stabilisation) to make additional payments over and above those certified by the Actuary. This report outlined the proposal by the Council to repay its 2019/20 deficit recovery (primary) contributions at the start of that year and then prepay the next three years primary contributions at the start of 2020/21. It was estimated that paying the 2019/20 secondary contributions early would make a saving of £350k in the amount the Fund would accept from the Council in order to receive their secondary contributions early on 1 April 2019 (instead of accruing monthly throughout the year). Furthermore, if it was assumed that the likely secondary contributions during the next valuation period were the same as the current cycle (£18.93m) then prepaying three years early on 1 April 2020 (rather than annually) would amount to a saving of £3.065m over that three year period. In total, therefore, the Fund could accept one year’s contributions early on 1 April 2019 (£18.58m) and 3 years’ contributions early on 1 April 2020 (£53.725m) which would lead to a total reduced payment from the Council of £3.415m.

The Board noted that there was a confidential appendix to this report containing the Actuary's assessment of the benefits of prepayment and setting out some of the risks which Board Members had read and would take into account when taking its decision.

The Head of Treasury and Financial Services informed the Board that there was no risk from the Fund’s perspective.

It was noted that several other council LGPS funds prepaid their contributions in this way and neither the Actuary, Hymans Robertson, nor Karen Shackleton, the Independent Advisor, had concerns about the appropriateness of this approach.

RESOLVED –

THAT the contents of the report be noted.

Report of the Executive Director Corporate Services

This report presents the background to the Insight Investment absolute return bond strategy (ARBS) mandate and includes work by our Investment Consultant, KPMG in reviewing the mandate and making recommendations about the future given CIV and other fixed income ideas.

The Pension Committee, at its meeting on 27^th February 2019 agreed:

1.     To transition assets in four quarterly instalments from Insight to the CIV multi asset credit sub fund run by CQS

2.     To delegate the conclusion of this transfer, including legal due diligence and transition of funds, to the Executive Director Corporate Services

To monitor the transition away from Insight, over the next four quarters, at Pension Committee.

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 Board wishes to discuss the contents of a closed exempt appendix it may pass the proposed resolution identified at the end of the document 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 Head of Treasury and Financial Services presented the report which set out the background to the Insight Investment absolute return bond strategy (ARBS) mandate and included work by Camden Fund’s Investment Consultant, KPMG in reviewing the mandate and making recommendations about the future given London CIV and other fixed income ideas.

It was noted that Insight replaced ‘traditional’ bond manager Goldman Sachs at the beginning of 2014, with Camden transferring approximately £120m to their Insight Bonds Plus 400 fund which was an ARBS. Funds with Insight stood at £125m as at the end of December 2018.

The Pension Board was reassured that the performance of managers was satisfactorily scrutinised and monitored on a regular basis. The Pension Committee had explored the poor performance of Insight over the previous quarters and years. Currently Insight had delivered one year underperformance of -10.6% relative to their target and since inception -3.9% versus that same target (LIBOR +4%). On an absolute basis, Insight had delivered  -5.8% over one year and since inception had added 0.6% to funds originally transitioned to them. Insight were chosen as they were judged the best product amongst the three finalists both based on their tender submission and at interview. At the time of the appointment interest rates were expected to rise, and bond capital values forecast to fall. The mandate was expected to achieve positive returns in all market conditions, but might be expected to perform better when interest rates rise and when there were significant opportunities to take relative trades, and less well when interest rates fall.

Camden Fund’s Investment Consultant, KPMG had been asked to review the ARBS mandate and the fixed income strategic asset allocation in general and make recommendations to the Committee. The Board noted that KPMG’s review was attached to the report as a confidential appendix (Appendix B) as it contained commercially confidential comments throughout about investment managers, which Board Members had read and would take into account when taking its decision.

Karen Shackleton, the Independent Advisor to the Committee, had also reviewed Insight’s performance during their mandate and examined whether an ARBS was right for the Fund. Her comments were included in Appendix A to the report.  She concluded that the decision to move to ARBS might have been early, given market experience, and that there was doubt that Insight were best placed to deliver for the Fund, although there was some evidence that they had taken successful positions in the past. A phased transfer out of Insight’s ARBS into the London CIVs multi asset credit sub-fund would dilute the timing risk of any switch, allowing the pension fund a longer opportunity to partially re-capture the losses seen in Q2 2018 from the remaining open Australian/German position.

A phased transfer from Insight to CQS was, therefore, recommended by KPMG and supported by the Independent advisor, rather than to transfer all of the assets to a new manager in a single  ...  view the full minutes text for item 10.

Report of the Executive Director Corporate Services

This report provides an update on the London Collective Investment Vehicle’s (CIV) infrastructure proposal.

The Pension Committee, at its meeting on 27^th February 2019 agreed to:

1.     Allocate 5%of assets or £80m to the London CIV Infrastructure Sub-Fund

2.     Delegate authority to the Executive Director Corporate Services to do the final due diligence on StepStone

The Committee also noted that a further paper will be brought back to the July Committee to consider funding options for the new Infrastructure mandate and which manager to use to fund the Infrastructure mandate

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 Board wishes to discuss the contents of a closed exempt appendix it may pass the proposed resolution identified at the end of the document 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 Pension Board noted an update on the London Collective Investment Vehicle’s (CIV) infrastructure proposal. It also noted that the Pension Committee, at its meeting on 27^th February 2019, agreed to:

1.     Allocate 5% of assets or £80m to the London CIV Infrastructure Sub-Fund; and

2.     Delegate authority to the Executive Director Corporate Services to do the final due diligence on StepStone.

A further paper would be brought back to the July Committee to consider funding options for the new Infrastructure mandate and which manager to use to fund the Infrastructure mandate.

The Board noted that KPMG’s review was attached to the report as a confidential appendix as it contained commercially confidential comments throughout about investment managers, which Board Members had read and would take into account when taking its decision.

In response to questions, the Head of Treasury and Financial Services informed the Board that:

-        Six other London Boroughs were also considering this infrastructure investment, details of which would be emailed to Board Members;

ACTION BY: Executive Director Corporate Services

-        London CIV would look at the investments and decide if they were ethical and appropriate.

RESOLVED –

THAT the contents of the report be noted.

There was no urgent business.

The provisional dates for meetings of the Pension Board due to be held in the 2019-20 Municipal Year are set out below:

Thursday, 10^th October 2019

Tuesday, 17^th March 2020

Dates for all meetings being held during the 2019-20 Municipal Year will be confirmed at the Statutory Council meeting in May 2019.

The provisional dates for meetings of the Pension Board due to be held in the 2019 - 20 Municipal Year were noted as set out below:

Thursday, 10th October 2019

Tuesday, 17th March 2020

It was noted that dates for all meetings being held during the 2019-20 Municipal Year would be confirmed at the Statutory Council meeting in May 2019.

Should the Board wish to go into closed session, it will take the following resolution:-

THAT the press and public be excluded from the proceedings of the Pension Board on 13^th March 2019 during consideration of Item 15 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 (as amended) and that the public interest in maintaining the exemption outweighs the public interest in disclosing the information.

Specifically –

Publicity in respect of Item 15 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) by virtue of Category 3 of Schedule 12A of the Local government Act 1972 (as amended).

THAT the press and public be excluded from the proceedings of the Pension Board on 13^th March 2019 during consideration of item 15 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 and that the public interest in maintaining the exemption outweighs the public interest in disclosing the information.

Specifically -

Publicity in respect of item 15 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) by virtue of Category 3 of Schedule 12A of the Local Government Act 1972.

To approve and sign the Part II minutes of the meeting held on 15^th October 2019.

PART II

The Pension Board discussed the contents of the confidential minute as detailed in the restricted part of these minutes.

PART I

Having discussed the content of the confidential minute, the Pension Board returned to open session.

RESOLVED –

THAT the Part II minutes of the meeting held on 15^th October 2018 be approved and signed as a correct record.