Agenda item

12:25

The attached report of the Independent Financial Adviser (PF16) 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 public should be excluded during this item because its discussion in public would be likely to lead to the disclosure to members of the public present of information in the following prescribed category:

3.        Information relating to the financial or business affairs of any particular person (including the authority holding that information) and

since it is considered that, in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information, in that such disclosure would prejudice the trading activities of the fund managers involved and would prejudice the position of the authority's investments in funding the Pension Fund.

The Committee is RECOMMENDED to receive the report, tables and graphs, to receive the oral report, to consider any further action arising on them and to bear the Independent Financial Adviser’s conclusions in mind when considering the Fund Managers’ reports.

The Committee had before it the report of the Independent Financial Adviser (PF16) 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 would also report orally and any information reported orally will be exempt information.

The public should be excluded during this item because its discussion in public would be likely to lead to the disclosure to members of the public present of information in the following prescribed category:

3.        Information relating to the financial or business affairs of any particular person (including the authority holding that information) and

since it was considered that, in all the circumstances of the case, the public interest in maintaining the exemption outweighed the public interest in disclosing the information, in that such disclosure would prejudice the trading activities of the fund managers involved and would prejudice the position of the authority's investments in funding the Pension Fund.

Mr Peter Davies, Independent Financial Advisor introduced his report.  The equity market rally which began in late March continued at a slowing pace during the quarter, with the result that the All-World Index ended June less than 1% below its end-2019 level. The UK market, however, lagged all other regions, and is well adrift over 1- and 3-year periods.  US equities have recouped most of the losses sustained in February and March.

The surge in the Technology sector accounted for much of the gain in the global index, with Health Care and Consumer Services (two of the more resilient sectors in Q1) rebounding strongly. Financials continued to lag the broader market.  The recovery in the FTSE 100 was hampered by the weakness in the Oil & Gas and Financials sectors.

Government bond prices rose during the quarter as yields reduced further, while corporate bonds continued their sharp rally as Central Banks stepped in to buy bonds as part of their quantitative easing programmes.  The pound was little changed against the dollar and the yen in the quarter, but lost ground against the euro. In July however, sterling rose by 6% against the dollar, reaching $1.31, and also rose 4% on the yen and 1% on the euro.

He further reported that with the coronavirus pandemic having claimed 750,000 lives worldwide and increasing numbers of cases being reported in many regions, it was clear that the direct and indirect effects of the pandemic would dominate the economic outlook for a long while yet.  Fiscal and monetary actions had cushioned the impact in the short term, but in time the full effects of the pandemic would become apparent in elevated levels of unemployment, corporate failures and, possibly, social unrest. Against this background it was hard to see equity markets continuing their recent rally, which had taken them close to the peak levels of February. Government bond yields, meanwhile, should maintain their current levels as central banks mop up the increased issuance and hold interest rates down.

Councillor Field-Johnson questioned Mr Davies if he had a view on how International holdings would be affected.  Mr Davies replied that the stirling could take a further fall, that the Dollar was a bit weak, but that the Euro remained very strong.

RESOLVED: to receive the report, tables and graphs, to receive the oral report, to consider any further action arising on them and to bear the Independent Financial Adviser’s conclusions in mind when considering the Fund Managers’ reports.