Report authorised by: Fiona McDermott, Strategic Director for
Finance and Investment
Contact for enquiries: Andrien Meyers, Treasury and Pensions, 0207 926
Steven Law (Hymans Robertson), Tony English (Mercer Investment
Consulting), Sandy Dickson (Mercer Investment Consulting); and Andrien
Meyers, Head of Treasury and Pensions; presented the report and
answered questions as below:
· Andrien Meyers reported that over the period the value of the Fund had increased by £10 million. This level of performance was not up-to-par. Furthermore, the report showed a 6% growth over the three-year period, which was 0.5% below the benchmark. This further highlighted the shortage of the investment manager performance.
· European markets had fallen.
· Global equities had increased.
· Benchmark underperformance was likely due to fixed issues rather than markets.
· The current benchmarks were challenging in the current climate.
A query was raised on what was challenging about the current conditions.
· Mercer advised that 8% achieved over long-term made it harder to achieve over the short-term. The main difficulty was in determining benchmark figures for Property and DGF. Managers were facing significant challenges in the current climate, which had not existed at the time that the benchmarks were proposed and agreed by investment managers
Andrien Meyers advised that the Lambeth Pension Fund had two DGF’s with LCIV, namely Ruffer and Pyrford, and as an asset class, DGF had underperformed. This was something that the Lambeth Pension Fund had taken into account in the strategy and was also being looked into by other London pension funds.
A query was raised on what exactly were Senior Loans?
· Andrien Meyers advised that senior loans were private debt allocations to Permira and Churchill and were deemed as a relatively safe risk. £75-80m commitment circa only 10million actually invested.
A further query was raised on why performance had been so low for the quarter. It was thought that it might be a common issue in the market, but it may have also reflected the long-term risk level of the investments.
Andrien Meyers advised that the Fund’s fossil fuel exposure was currently 1.6% of assets (as noted in the papers) section 2.23, page 39, which also gave the breakdown of fossil fuel holdings by investment manager. Members enquired if there was a breakdown of the fossil fuel holdings of each investment manager and were advised that this list existed and was with officers.
Andrien Meyers advised the Committee had not specifically stated that it had a policy on fossil fuels, even though the Chair advised carbon neutrality during previous meeting. Committee approved to be fossil fuel free on equity portion of the fund and that they were happy to move to fossil fuel free.
It was noted that at a previous meeting, a declaration of no investments in fossil fuels had been made. However, this class may have been confused with the category of ‘carbon neutral’, which did not necessarily equate to fossil fuel free. Clarity / consistency in reporting was requested.
A request was made by the Committee for future reports to contain trend graphs and for Mercer to provide this in bar chart format.
The Committee noted that the bar in the gilts graph could be seen as high. Mercers reminded the Committee that when interest rates went down, gilt performance went up as a result of quantitative easing (QE).
1. That the report, together with the information in the accompanying exempt from disclosure report, be noted.