Agenda item

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 26 November 2019, 3 March 2020, 20 July 2020 and 9 September 2020.

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

The Pension Board was reminded that it had 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 Board must also ensure the effective and efficient governance and administration of the scheme. The Interim Director of Finance presented this report which summarised the items presented and decisions made at the Pension Committee meetings on 26^th November 2019, 3^rd March 2020, 20^th July 2020 and 9^th September 2020.

Councillor Olszewski said that it had been a turbulent year with massive challenges for the fund managers. At different meetings he noticed that the Pension Committee had expressed concern about a number of managers including Harris and Partners. He recognised that their performance could have been affected by Covid-19, but asked if there were any concerns that the Board should be aware of.

The Interim Director of Finance referred Board members to Table 7 on page 54 of the agenda, which showed the latest performance of all managers. Since inception Harris had returned 7.6%, but their target was 14% so they had underperformed by 6.4% and, therefore, had one of the biggest underperformances. They were holding one of the largest proportion of equities so was a cause for concern. It was noted that the two active equities managers were Harris and Baillie Gifford and both had different investment styles. Baillie Gifford was a growth manager so expected companies to earn more money by growing their market share and returning more. They typically invested in technology and financial service companies. Harris on the other hand was a value manager and so bought companies with cheap valuations in relation to their intrinsic value and sold them when their share price had increased. Those managers had had a particularly hard time and had not been rewarded in the market, whereas growth managers had been in favour since the financial global crisis in 2008/9.

He added that Harris in comparison to the value index had been doing well and had been appointed by other pools in that value category, but the Pension Committee had been concerned at the scale of the underperformance and the value of the assets they held.

Some Partners’ funds had not performed to the 15% target, although it was acknowledged that that was a high bar to reach. The 2009 fund had not done so well, but the 2013 fund had broadly met the 15% target since inception and it was too early to comment on the 2017 fund. It was also too early to comment on Stepstone’s performance.

He reminded the Board that Ruffer and Standard Life were being sold out to cover infrastructure and Insight was also on their way out.

The Chair thanked the Interim Director of Finance for giving an overview of performance of the different funds, which he felt was useful.

Councillor Olszewski welcomed the discussion the Pension Committee had at its meeting in November 2019 around climate change and ESG and which demonstrated that there was more to consider than divesting. It was felt that the Committee would still have to put effort into the approach it adopted towards to climate change and ESG and it was suggested the Board would have a more general discussion around this when the chair attended the Board’s next meeting in March 2021.

          TO NOTE: Executive Director Corporate Services

It was noted that, following the concern of the Chair of the Pension Committee in March about the lack of information on the outcome of voting decisions, PIRC was working on this and would submit a report to the March Pension Committee meeting.

Pension Board Members also noted that previously someone had been appointed to the post of Chief Investment Officer (CIO) at the London CIV, but had not remained in that position for very long, so an interim appointment had been made until a permanent CIO could be recruited. London CIV had now appointed Jason Fletcher, who was previously at LGPS central, as the permanent CIO. Although it had been a been a turbulent time for London CIV’s staffing levels, they had now built up their team and there was a strong degree of stability.

RESOLVED –

THAT the contents of the report be noted.