Agenda and minutes

Pensions Committee - Wednesday 8 July 2020 6.30 pm

Venue: Microsoft Teams - please copy and paste the following link into your browser: https://bit.ly/3j5VgXe

Contact: David Rose, Telephone 020 7926 1037, Email: DRose@lambeth.gov.uk 

Items
No. Item

1.

Declaration of Pecuniary Interests

    Under Standing Order 4.4, where any councillor has a Disclosable Pecuniary Interest (as defined in the Members’ Code of Conduct (para. 4)) in any matter to be considered at a meeting of the Council, a committee, sub-committee or joint committee, they must withdraw from the meeting room during the whole of the consideration of that matter and must not participate in any vote on that matter unless a dispensation has been obtained from the Monitoring Officer.

    Minutes:

    There were no declarations of interest.  

     

2.

Minutes of the Previous Meeting

    The Minutes of the previous meeting, held on 11 March 2020, will be reported to the next meeting.

    Minutes:

    The minutes of the meeting on 11 March 2020 were postponed to the next Committee meeting.

     

3.

Action Log and Work Programme pdf icon PDF 299 KB

    Additional documents:

    Minutes:

    Andrien Meyers, Head of Treasury and Pensions, presented the report and answered questions as below:

    ·           50% of members had confirmed training on 5 August 2020 and officers encouraged further sign-up.  Mercer would cover Environment, Social and Governance (ESG) in the training session.

    ·           Officers and the London Collective Investment Vehicle (LCIV) had begun to look at carbon footprints to aid in the formulation of ESG beliefs for the Triennial Valuation.

    ·           Liability Driven Investment (LDI) training would take place once the Government issued Retail Price Index (RPI) was reformed.

     

     

4.

Covid-19 and the impact on the Lambeth Pension Fund pdf icon PDF 256 KB

    • View the background to item 4.

    Additional documents:

    Minutes:

    Tony English, Mercer; and, Andrien Meyers, Head of Treasury and Pensions, introduced the report and noted:

    ·           The appendix for this item was in the agenda pack on page 23.

    ·           The funding ratio had declined to 80% during the first quarter to March 2020 due to market impacts.  By May-end it was subsequently back to 83% due to February investments and as such, and on the advice from the Fund actuary, there was no need to revisit the contribution strategy and rates were sensible but continued to be monitored.

    ·           The value of the investment portfolio had declined by £91.2m (6%) to £1,427m, but had subsequently increased to £1,575m, performing better than in March and December.

    ·           The cashflow position was strong, due to investment income, and had £60m in a money market fund and £29m in cash as contingency.  No other Fund employers had contacted regarding payments, although a policy could be issued if required.

    ·           There was no impact on staff, who had been working from home, arising from Covid-19.

    ·           The Risk Register and Fund’s business continuity plan had both been updated.

    ·           Income or dividends were expected to decline, but capital value was increasing; however, the Fund did not require dividend income, which was reinvested if received.

    ·           The Fund’s portfolio had performed well due to the implementation of three changes:

    o    all corporate bonds were moved into LDI, with corporate bonds subsequently poorly performing;

    o    the £200m global equities mandate was moved into exclusion mandate and was now worth £250m; and,

    o    Diversified Growth Funds (DGF) were moved to Multi-Asset Credit (MAC), although the latter had had poor returns and DGFs had not, this trend had reversed in April/May.

    ·           Investments remained volatile; however, the actuary and consultant advice reiterated that such global issues would happen, and there was no need for imprudent reactions during short-term volatility.  Mercer would also be updating their views as necessary in due course.

     

    RESOLVED:

    1.         That the information in this report be noted.

     

     

5.

Lambeth Pension Fund - Investment Performance Review - 31 March 2020 pdf icon PDF 287 KB

    • View the background to item 5.

    Additional documents:

    Minutes:

    Tony English, Mercer; Sandy Dixon, Mercer; and, Andrien Meyers, Head of Treasury and Pensions; and Sandy Dixon, Mercers, introduced the report and noted:

    ·           Local Government pension funds had suffered recent declines and although the Lambeth Fund had underperformed at -0.7%, it had outperformed the underperformance benchmark and peer average.

    ·           Two DGF mandates (12%) had been terminated into MAC, with the third DGF mandate (6%) outside the LCIV yet to be completed, due to ongoing work with two other London boroughs to find a third MAC manager in which to transfer funds.

    ·           Monies had been moved into MAC after the MAC market declined, but prior to picking back up.

    ·           Officers were regularly meeting with the LCIV on investing in the local London Fund or in the LCIV renewable energy fund.

    ·           There were numerous transitions over the last quarter, detailed in the agenda pack, page 27.

    ·           The £80m fall in assets was driven by equity markets, with global equities down 20%.

    ·           DGFs had initially held their value and had been sold prior to their decline.

    ·           The ability of the Fund’s diversification to withstand downward market trends reinforced the benefits of the Fund’s adopted investment strategy.

    ·           The PAAMCO mandate had been terminated; however, the Fund had no control over the remaining investment, which was at the fund managers’ discretion to sell.

    ·           There was no deadline to fully divest from fossil fuels, although the Fund’s direct exposure was nil and indirect exposure was at 0.79%, a low figure to which Members offered their congratulations.

    ·           There were two ways to benchmark MAC via a blend of bond indices.

    ·           The long-running CQS mandate had a cash return of 4%.

    ·           MAC was inherently risky and this risk materialised in Q1, but Q2 had seen this class become profitable and had increased funds by £17m since March, as shown in the agenda pack (page 23).

    ·           The deadline for agreeing LCIV’s MAC investment had been missed; however, Lambeth officers were able to negotiate special dispensations and invest into MAC in time to benefit on the outperformance.

     

    The Chair thanked officers for their collaboration with local investment funds, the LCIV, and other councils’ committees; and for their hard work in delivering the Committee’s recommendations.

     

    RESOLVED:

    1.         That the report, together with the information in the accompanying exempt from disclosure report, be noted.

     

6.

Exempt Business

    RECOMMENDED that members of the Press and Public be excluded from the meeting for the remaining items of business under Section 100A(4) of the Local Government Act 1972 on the grounds that these items: (i) involve the likely disclosure of exempt information as defined in Paragraph 3 of Part 1 of Schedule 12A of the Act; and (ii) the public interest in maintaining the exemption

    outweighs the public interest in disclosing the information.

    Minutes:

    MOVED by the Chair and,

     

    RESOLVED:

    That under section 100A-H of the Local Government Act 1972, the press and public be excluded from the remainder of the meeting on the grounds that, for the item of business summarised below, it was likely that exempt information, as defined by Section 1001 and Schedule 12a of the Local Government Act 1972 and as specified by reference to the appropriate paragraph thereof, would be disclosed to them:

     

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

     

     

7.

Lambeth Pension Fund - Investment Managers Summary - 31 March 2020 (Exempt)

Minutes:

RESOLVED:

That under section 100A-H of the Local Government Act 1972, the press and public be excluded from the remainder of the meeting on the grounds that, for the item of business summarised below, it was likely that exempt information, as defined by Section 1001 and Schedule 12a of the Local Government Act 1972 and as specified by reference to the appropriate paragraph thereof, would be disclosed to them:

 

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

8.

London Collective Investment Vehicle (LCIV) Quarterly update - 31 March 2020 (Exempt)

Minutes:

RESOLVED:

That under section 100A-H of the Local Government Act 1972, the press and public be excluded from the remainder of the meeting on the grounds that, for the item of business summarised below, it was likely that exempt information, as defined by Section 1001 and Schedule 12a of the Local Government Act 1972 and as specified by reference to the appropriate paragraph thereof, would be disclosed to them:

 

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