Agenda item

The Board is invited to review the report received by the Pension Fund Committee at its meeting on 3 March 2023 and offer any comments back to the Committee which will be further discussing the issues at its next meeting on 9 June 2023.

The Board received a report on the asset allocation.  Officers advised the Board that the review was one of the most important things that the committee does, and it was carried out every three years in line with the Valuation process.

Officers focused on the recommendations that the Committee considered and agreed.

1. Against a higher inflationary environment to work with Brunel to ensure that the Fund’s assets continue to match the liability profile at the cashflow level, including if necessary, generating sufficient income to fund increased pension payments.

2. To consider if the Fund should put in place a currency hedging strategy, utilising the resources available through Brunel.

3. To review the exposure to the UK equity market with the objectives of:

i. Reducing the overweight position of UK Equities in comparison to the Global UK weighting over time. Consideration will be given to switching to either the Paris Aligned Global passive sub fund or to the active Global Sustainable Investment sub fund.

ii. For the retained UK exposure to achieve better representation to UK plc in earnings terms and reducing carbon/ climate risk exposure, either on a passive or active basis.

4. To review the Emerging Markets mandate so as to remove exposure to China so far as is practically possible.

5. In the absence of similar arrangements being offered by Brunel, to retain the listed Private Equity (PE) portfolio and return the management of that to a semi-active basis to ensure that an appropriate balance of investments is maintained.

6. To continue to work with Brunel and independently to meet the Fund’s evolving ESG and Climate policy requirements.

7. To consider the DLUHC “Levelling Up” local investment proposals

8. To confirm that the Fund will continue to reinvest on a timely basis capital distributions made by legacy managers and Brunel as investments mature. Cash and making sure there is sufficient cash to actually pay pensions as the committee.

The officers advised the Board that for many years the fund had been cash positive i.e., retained more money every month from employers and scheme members then paid out in pensions.  However, the amount of excess cash had been declining over the last few years.  It was noted that the Committee had agreed to work with Brunel to look at their investments to ensure they receive sufficient cash from their investments on a timely basis.

The Board discussed currency hedging and officers informed the Board that the fund had never hedged any of its currency.  It was noted that the report from the independent investment advisor suggested the Committee continue to look at the issue.  The Committee deferred a final decision to the June Committee.

The Board discussed the allocation and exposure to the UK markets.  The Board also discussed the exposure of the FTSE 100 to the fossil fuel industries as it was one of the highest carbon intense portfolios.  It was noted that the Committee agreed to explore options to reduce the weight to the UK and exposure to climate risks at the June Meeting.  It was also noted that the Committee discussed potentially switching money to the Paris aligned global passive fund or global sustainable fund.

The Board noted the Committee’s comments on the listed private equity market.  It was noted that Oxfordshire had long-standing investments in private equity companies who were listed on the stock exchange. The officers informed the Board that the Committee had agreed to continue those investments in the short term outside of the pool. It was noted that the independent advisor was concerned that those were now very large and perhaps needed to be rebalance across some of the other companies.

The Board noted the report and recommended the Committee to take into account its comments on costs and net fees performance as appropriate within the decision making.