Agenda item

Report of the Independent Financial Adviser (PF7).

The report sets out an overview of the current and future investment scene and market developments across various regions and sectors. The report itself does not contain exempt information and is available to the public. The Independent Financial Adviser will also report orally and any information reported orally will be exempt information.

The Committee is RECOMMENDED to receive the report.

The Committee had before it a report which set out an overview of the current and future investment scene and market developments across various regions and sectors. The report itself did not contain exempt information and was available to the public. The Independent Financial Adviser will also report verbally, and any information reported orally will be exempt information.

Mr Peter Davies, Independent Financial Advisor in introducing his report, referred the Committee to the table at page 1 of the report, the economic consensus forecasts had been downgraded quite a bit since writing the report, and the UK consensus now stood at -8.7 for this year and the USA slightly lower at -3.8And eurozone -8%, but those were very sensitive to as when lockdown was relaxed and Government support received etc. 

Markets had recovered quite a lot since the end of March and in round numbers if the overall fund fell by £370m in the first quarter (13.5%), then at the moment it had recovered a half of that (£185m) to the first order so the position was not looking anywhere as near as bad as at the end of March, but was nevertheless a fall since the start of the year of 7% which was very substantial in historical terms.

The big test would come when Government support such as Furlough pay was tapered off and Government funding to companies had been fully invested and which companies would still be going concerns come the Autumn.  It would take some time to see what the total effects were and that was true of the listed market and the bond market and also through the private equity market.  Looking at the companies they were invested in, there was not a big exposure to the leisure industries, not through Adam Street and very little through the listed portfolio, but there will still be a case where companies are in difficulties and it would be a while before the Committee saw the extent of that.  The rebound outlook, therefore, particularly in the equities markets may not be so good in the next few months as the actual effects become more apparent.

Councillor Nick Field-Johnson questioned what the Committee’s outgoing were going to be and what the liability of the fund would be over the next 5 years and over the next 10 years to ensure we had ample coverage.  He asked whether the Committee could have a brief report on this matter.

Mr Collins reported that the Committee had received a report on that as part of the Assest Allocation report back in March.  M J Hudson had carried out a piece of work to look at the matter.  At the time, they were basing it on what their projections of what the Asset Allocations decisions would be.  That now needed to be updated.  The figures from the Actuary suggest in the main that the contributions received were more than sufficient to pay for the pensions going out for the next five years.  The key question was the investments they were making in the private markets and how quickly that money was called and where the money for that would come from.  He had been in discussions with other officers  regarding this issue and it was felt that there were significant cash reserves that would help them meet those demands, but were working with Brunel and would update the M J Hudson figures and get a report sent out to all members of the Committee.

Councillor Roz Smith expressed her concern in relation to the property market and the level of unemployment in the UK and USA, and wondered if peter had a view on how the dollar was going to hold up and the effect on the Ftse share price?

Mr Davies reported that the dollar had been a bit weaker recently, but not dramatically, and that the dollar was still the reserve currency.  Even when the US was in recession as were all the other major economies, he didn’t believe there would be a run on the dollar, he believed it would remain the stable currency.  He believed more a more worrying issue was the supply chains restocking and the maximum would now be just in case. Although the property market was suffering the industrial market was very strong.

RESOLVED: to receive the report.