Agenda item

10.55am

This report will cover an overview of the financial markets, the overall performance of the Fund’s investments against the Investment Strategy Statement and commentary on any issues related to the specific investment portfolios.  The report includes the quarterly investment performance monitoring report from Brunel.

John Arthur, Independent Financial Advisor presented the report which provided an overview of the financial markets, the overall performance of the Fund’s investments against the Investment Strategy Statement and commentary on any issues related to the specific investment portfolios.  The report included the quarterly investment performance monitoring report from Brunel.

He commented on the current performance of the Fund which stood at an ‘all time’ high at £3.75bn, however remained beneath its benchmark due to the poor performance from the Global and Private equity portfolios managed by Brunel.  He also highlighted the effect of the US Dollar which continued to weaken against all major currencies and had lowered the return of US assets to a Sterling based investor.  However, it was noted that in performance terms, whilst the Fund was lagging its benchmark, over the longer term it was surpassing the actuarial’ investment return.

He advised the Committee that the Fund had requested Apex to carry out a Strategic Asset Allocation review, and as part of that the current benchmarks would be reviewed to ensure they were appropriate.  (ACTION)

Gregory Ley, Pension Fund Investment Manager advised the Committee that the Fund would be moving money out of equities into cash, which would reduce the exposure to the US Dollar.  John Arthur advised the Committee on his concerns regarding the US President and the ongoing effect of increased tariffs, and that by reducing the equities to the strategic benchmark, reviewing the strategic benchmark which would be carried out over the second quarter of this year, would provide assurance that the Fund was not overweight within the US equity market.

The Committee expressed their frustration that the report did not show how Brunel’s performance compared against other asset classes and that this had been requested at the meeting of 13 December 2024.  John Arthur responded that he had expected this information to be shared with the Committee in Brunel’s own reports, however, could include this in future reports if it did not cause unnecessary duplication.  It was agreed, on the Committee’s wishes, that this information be provided by the Independent Financial Advisor, in his report.  (ACTION)

The Committee repeated their concerns with the level of current risk and highlighted the need for a strategic allocation review in terms of those risks that could apply and John Arthur, whilst highlighting the level of stagnation, cautioned against responding to short term fluctuations in inflation to determine level of risk and rather position the Fund for long term growth.

Stephen Davis, Local Pension Board Member arrived at the meeting.

In response to queries raised by the Committee, Mark Smith, Head of Pensions advised that any suggested changes to the benchmark would be agreed with themselves and their Pooling partner prior to implementation.

In response to query regarding the level of risk of moving investments to cash, John Arthur advised that this would be a transitory move and could be reallocated when moving to the new Pool, however, would advise this to be a short-term allocation only.

In response to a request from the Committee, John Arthur agreed to feedback to Apex, a request for an in-depth review of the level of asset allocation in either private equity or sustainable investments, to determine any future investment opportunities as part of the Strategic Asset Allocation review.  He also agreed to include further detail on the underlying private equity holdings with a view to either moving investment into private equity holdings, or transferring to those that are performing better.  (ACTION)

The Committee thanked the Independent Financial Advisor for his comprehensive report.