Agenda item

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 2024.

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

The Head of Treasury and Financial Services introduced the report which outlined the performance of the Camden Pension Fund investment portfolio and the individual investment managers for the quarter ended 31 March 2024.

He highlighted that global markets had generally showed strong returns for equity, with the FTSE All World increasing by 9.1% in the quarter with only Asia and emerging markets lagging behind, other regions were showing strong growth in the one-year period. The retail price index (RPI) looked to

have settled down in the quarter with the sharp inflationary spike now appearing to have abated and central banks thinking about policy easing. The overall fund value was just below £2.1billion. The overall fund performance this quarter achieved a 4.3% return just behind the target of 4.8%.

Karen Shackleton, Independent Investment Advisor, provided the committee with an overview of her comments on the financial markets and provided detail on the performance of the individual Investment Managers, as set out in Appendix A to the report.

She highlighted that:

Baillie Gifford, the growth global equity manager had a better showing this quarter with a return of 9.8%, outperforming Harris by nearly 6%. Although over the 3-year period they still had a lot of ground to make up. The best performing stocks in absolute terms were the tech stocks adding 6 new positions making 12 sales pointing out however that smaller holdings were adding less value than was the case previously.

Harris, the Global Equity Value Manager underperformed during this quarter which was due to poor stock selection.

Legal and General – there were no issues with the tracking of these funds and no concerns. Though to be noted that the Sustainable index did not do as well as the broader market Cap index in the quarter.

CBRE – the portfolio of commercial property funds. The main detractors from performance in this quarter were Airport Industrial’s, Ardstone UK Regional Office and Standard Life Long Lease Property Fund. The top contributors to returns for the quarter were Unite UK Student Accommodation, M&G Secured Property Fund and Fiera Real Estate Opportunity Fund IV. The split of the different fund returns showed the benefit of diversification. The Fund Manager had warned that residential yields were beginning to peak in prime locations and London had seen falls in rental growth.

Partners – This was a Global Property Manager investing in 3 different funds. that Camden Pension Fund was invested in. The 2009 Fund was now in realisation and was winding down.

The 2013 fund had realised half of its investments and had distributed 92% already so was doing okay. The 2017 fund was 61% drawn and had got 14 assets below expectations which required some monitoring.

HarbourVest – This was a Global Private Equity Manager. This fund had provided strong returns in the past but were now facing some challenges with a quarter of the portfolio now behind expectations due to the negative impacts of inflation and high interest rates. This also needed to be monitored.

London CIV - – The MAC fund (blended fund -CQS/Pimco) This she noted was a multi asset credit portfolio which was now blended across two managers CQS and Pimco and returns had now been improving although still behind the target. The Committee were informed that there were 3 defaults on this fund which would be a headwind and detract from returns, although not significant at the moment would require future monitoring. It was also pointed out that London CIV had indicated that although both managers were on normal monitoring consideration was being given to bringing forward a deep dive analysis of CQS if there were any concerns.

London CIV – Infrastructure Fund – Stepstone – These were investing in a range of Infrastructure portfolio Funds. There were 7 primary funds and one secondary fund. Members were informed that there were some initial deployment concerns when the Pension Fund first invested, but the deployment was now ahead of expectations so there were no longer concerns.

London CIV – Real Estate Long Income Fund – Aviva – This was a property portfolio investing in long lease income type strategies which were very secure inflation linked income managed by Aviva. These were aligned to the liabilities which were inflation linked. The Committee was informed that 98% of leases were inflation linked which was good to have in an inflationary environment. It was also pointed out that the manager was of the view that the property market was at the bottom of the cycle which was positive. London CIV had also extended the period for the exposure limits on industry sector and single creditor limits till June 2027 to avoid sales.

London CIV – Diversified Growth Fund – Baillie Gifford -This was a multi asset portfolio designed to diversify the equity risk in the total portfolio managed by Baillie Gifford. Performance had been an issue for quite a while. London CIV had put them on enhanced monitoring back in 2022 and had decided to maintain this level of monitoring on the manager. They had seen some progress but wanted to monitor for a while longer. It was pointed out that the weighted average carbon intensity was significantly higher than the comparative benchmark, although this was not a sustainable mandate it did require monitoring.

Responding to a question about whether there should still be concerns with some of the investment fund managers going forward, the Independent Investment Adviser informed members that the Committee had decided not to recommit to the next fund because of concerns with what was occurring with the most recent fund which was sensible under the circumstances. She also pointed out that members had met with Partners in February 2024 and the data provided was to the end of March 2024 which was the same quarter.

RESOLVED –

THAT the contents of the report be noted.