Agenda and minutes

Pensions Committee
Monday, 14th January, 2019 10.00 am

Venue: Chamber, Civic Centre, Hanbury Road, Pontypool, NP4 6YB

Contact: Geraint Thomas  Senior Business Support Officer - Democratic Services

Items
No. Item

1.

Attendance and Apologies / Presenoldeb ac Ymddiheuriadau

Minutes:

1.1       Apologies were received from Councillor Peter Jones.

2.

Declarations of Interest / Datganiadau o fudd

Minutes:

2.1       Members confirmed the following declarations of personal interest as read by the CLO:

 

Councillor

In Receipt of Pension

Contributor

Huw Bevan

NONE

Self

Glyn Caron

Self

Self. Wife is a deferred member

Joanne Gauden

NONE

Self and daughter

Jon Horlor

NONE

Self

Raymond Williams

NONE

Partner and daughter

 

2.2       The CLO left the meeting.

3.

Minutes 10/9/18 / Cofnodion 10/9/18 pdf icon PDF 442 KB

Minutes:

3.1       The HoP confirmed that the reference to ‘European Parliament’ in paragraph 6.4 should be amended to ‘European Procurement Process’.

 

3.2       Subject to the above amendment, the minutes of the meeting held on 10 September 2018 were confirmed as an accurate record.

4.

For information: minutes of the Pension Board meetings of 25/7/18 and 24/10/18 / Er gwybodaeth: cofnodion cyfarfodydd y Bwrdd Pensiynau ar 25/7/18 a 24/10/18 pdf icon PDF 13 KB

Additional documents:

Minutes:

4.1       The Committee noted the minutes.

 

4.2       The Chair confirmed that the meeting held on 25 July 2018 was the first and only time that the Pension Board had been inquorate, and as a result no action was required at this point.

5.

Quarterly Investment Performance Report to 30/9/18 / Adroddiad Perfformiad Buddsoddi Chwarterol 30/9/18 pdf icon PDF 978 KB

Additional documents:

Minutes:

5.1       The HoP highlighted the following key headlines from the report:

  • The format of the report was different to previous reports, as the requirements regarding reporting had started to change, as had the services provided by the Fund’s Custodian.
  • The overall absolute returns for the Fund were +1.17% for Quarter 3 and +5.85% over the last year.
  • At the end of September 2018, the value of the Fund was £2,962 million; however this dropped to approximately £2,720 million at the end of December 2018. Since the turn of the year the value of the Fund had increased by £50-60 million.
  • Turbulence could be seen in the marketplace, particularly due to geo-political issues.
  • Paragraph 6.2 of the report highlighted the diversification of the Fund’s investment asset class allocations and the fact that £90 million was moved from Equities to Alternatives prior to Quarter 4 provided some protection as Equities fell in Quarter 4.
  • Significant divergence could be seen during the quarter between asset classes, with as much as 12% marginal difference between some asset classes.
  • October 2018 had been pretty poor for markets generally and Quarter 4 saw overall fund values drop by approximately 8%; however some market correction had taken place since.

 

5.2       Following questions from the Committee, the HoP made the following points:

  • He acknowledged that Fidelity’s investments in emerging markets, which were volatile areas, had not been particularly good during the last 12 months and the Fund was monitoring this; however they had performed very well prior to that. He added that Fidelity believed in their philosophy and structure.
  • Standard Life’s investment performance should not be 2-2.5% adrift from the market and they were under particular scrutiny from the Fund.
  • The final £30 million to be moved out of Equities had been delayed by the HoP due to timing issues around the currently volatile markets.

 

5.3       The DIIA provided the following headlines from Appendix 1 of the report:

  • Quarter 4 had been tough across all markets, with widespread volatility.
  • The FTSE 250 fell by 16% during Quarter 4; however it was up by 6% since January 2019.
  • Faangs (Facebook, Amazon, Apple, Netflix and Google combined) had seen a fall during Quarter 4, having been up during previous quarters.
  • Investors had removed record amounts of Equities investments from funds during the quarter.
  • The US Dollar was strong compared to Pound Sterling, the Euro and the Australian Dollar.
  • Credit spreads widened towards the end of the year and were expected to be volatile going forward. As a result, the DIIA had advised the HoP not to be adventurous regarding credit investments.
  • Pound Sterling weakness helps cushion the Fund, as it shrinks the deficit. The Fund’s liabilities were in this weaker market.

 

5.4       Following questions from the Committee, the DIIA made the following points:

  • The current US Federal shutdown was not a unique event and a compromise was likely soon.
  • It was a great time to be an investor, as things were cheaper and therefore the current climate should be seen  ...  view the full minutes text for item 5.

6.

Wales Pension Partnership; Joint Governance Committee Deputising Arrangements / Partneriaeth Pensiynau Cymru; Trefniadau Dirprwyo'r Pwyllgor Cyd-Lywodraethiant pdf icon PDF 264 KB

Minutes:

6.1       The HoP highlighted the following key headlines from the report:

  • The joint legal agreement between the constituent pension funds of the Wales Pension Partnership (WPP) is that each Constituent Authority may appoint a named deputy who must be an elected member of the Constituent Authority’s pension committee.
  • The Fund’s views can be expressed by the named deputy, should the Chair of the Pensions Committee be unable to attend a particular meeting of the Joint Governance Committee (JGC).
  • The Chair’s attendance at JGC meetings was very good; however in his absence a judgement could be made as to whether the deputy’s attendance was required.

 

6.2       The Chair added that he had attended almost all JGC meetings; however he was unable to attend the next meeting.

 

6.3       The Chair confirmed that Councillor Joanne Gauden had nominated herself to be the named deputy.

 

6.4       The Pensions Committee agreed that Councillor Joanne Gauden should be the Fund’s nominated representative to deputise for the Chair to attend meetings of the Wales Pension Partnership JGC in the event that the Chair of Pensions is unable to attend but considers it necessary for the Fund to be represented at the JGC at elected member level.

7.

Wales Pension Partnership; Stock Lending / Partneriaeth Pensiynau Cymru; Benthyca Stoc pdf icon PDF 203 KB

Additional documents:

Minutes:

7.1       The HoP highlighted the following key headlines from the report:

  • Members were invited to express their views and consider whether they were content to support stock lending across the WPP sub funds, subject of course to the consensus view of the other constituent funds.
  • Managers of sub funds may decide to lend out stocks for short periods of time for a variety of reasons.
  • The Fund used this practice in the late 1990s and early 2000s, until it was no longer considered worthwhile.
  • BlackRock use stock lending in its passive investments portfolios.
  • Stock lending could be useful; however caveats could be found in paragraph 6 of the report.
  • The Fund was unlikely to have strong views around stock lending and would probably be guided by the general consensus of the WPP.
  • Risk management and safeguards would need to be considered and worked through.

 

7.2       The ACER left the meeting.

 

7.3       Following questions from the Committee, the HoP made the following points:

  • All of the safeguards and administrative arrangements would be at WPP level, not at local level.
  • Not all sub funds would need to use stock lending.
  • The recommendation could be deferred until the next meeting of the Pensions Committee on 11 March 2019, which may allow for a better understanding of the thoughts of the other 7 Welsh pension funds.
  • Link brought forward the prospect of stock lending in order to off-set costs. It had not been considered regarding global equities sub funds, due to the focus being on setting them up, but it was now appropriate to bring it forward.

 

7.4       The Chair explained that as a member of the Local Authority Pensions Fund Forum (LAPFF) and the Responsible Investments Working Group (RIWG), he had strong Environmental, Social and Governance (ESG) views; however he did not believe that this was the case regarding the WPP, who still needed to develop an all Wales policy.

 

7.5       The Pensions Committee agreed to defer the matter for further consideration and a further report around:

(i)   Sufficient financial returns to justify the risk and work undertaken;

(ii)  Strong risk management procedures;

(iii)Sufficient safeguards around wider governance issues, such as voting and ESG matters; and

(iv)The views of the Operator regarding which sub funds were deemed most appropriate for stock lending to occur.

8.

Elected Members - Continuing Professional Development Update / Diweddariad Parhau Datblygiad Proffesiynol - Aelodau Etholedig pdf icon PDF 277 KB

Additional documents:

Minutes:

8.1       The HoP highlighted the following key headlines from the report:

  • Hymans Robertson had for the first time in recent months undertaken a national assessment of confidence across the Local Government Pension Scheme (LGPS) funds. This was due to the growing requirement that committees and boards had appropriate knowledge and understanding to demonstrate strong leadership and manage their funds.
  • The drivers for the assessment were outlined in paragraph 6.1 of the report.
  • The most confident topics and least confident topics across committees and boards could be seen on page 103 of the agenda.
  • Hymans Robertson was delighted with the 8 responses from Torfaen (4 from the Pensions Committee and 4 from the Pension Board), as some funds had no responses.
  • Due to the above response rate, the Fund was able to start a self-assessment of its further training needs. Appendix 4 highlighted the Torfaen specific results of the national assessment.
  • Paragraph 6.2 of the report outlined the areas that the Fund required further training and it provided an opportunity for joint training, involving the Pensions Committee and Pension Board. The Pension Board would be considering an almost identical report on 23 January 2019 and the Committee and Board could be approached outside of their meetings in terms of the style of training.

 

8.2       Councillor Bevan reminded the Committee that Markets in Financial Instruments Directive II (MiFID II) statutory changes were imminent and therefore needed to be included within the training programme.

 

8.3       The HoP recommended that he should bring a suggested proposal around future training back to the Committee at a future meeting.

 

8.4       The Pensions Committee agreed to note the training update and the results of the Hymans Robertson LGPS National Confidence Assessment provided within the report for information, comment and views on developing a programme of training and education that meets members’ requirements.

9.

Date of Next Meeting 11/3/19 / Dyddiad y Cyfarfod Nesaf 11/3/19

Minutes:

9.1       The next meeting is scheduled to take place on 11 March 2019.

10.

Exclusion of Press and Public / Gwahardd y Wasg a'r Cyhoedd

To agree the exclusion of the press and public from the meeting as presentations and meeting papers are not for publication because in accordance with paragraphs 12 and 14 of part 4 of Schedule 12a of the Local Government Act 1972 (as amended by the Access to Information Variation Order Wales 2007), it contains information about a particular individual and information relating to the financial and business affairs of particular persons including the Council and in all the circumstances of the case the public interest in maintaining the exemptions outweighs the public interest in disclosing the information.

 

Cytunogwahardd y wasg a'r cyhoedd o'r cyfa rfod gan nad yw cyflwyniadau a phapurau cyf arfod i'w cyhoeddi oherwyddyn unol â pharag raffau 12 a 14 o Ran 4 o Atodlen 12A Deddf Llywodraeth Leol 1972 (fel y'i diwygiwyd gan OrchymynMynediad i Wybodaeth (Amrywiad) Cymru 2007), ei fod yn cynnwys gwybodaeth am unigolyn penod ol a gwybodaeth ynymwneud â materion aria nnol a busnes unigolion penodol yn cynnwys y Cyngor a than holl amgylchiadau'r achos, maelles y cy hoedd o ran sicrhau'r eithriadau yn gorbwyso'r budd i'r cyhoedd yn nhermau datgelu'r wybodaeth.

Minutes:

10.1    The committee agreed to the exclusion of the press and public from the meeting as presentations and meeting papers were not for publication because in accordance with paragraphs 12 and 14 of part 4 of Schedule 12a of the Local Government Act 1972 (as amended by the Access to Information Variation Order Wales 2007), it contained information about a particular individual and information relating to the financial and business affairs of particular persons including the Council and in all the circumstances of the case the public interest in maintaining the exemptions outweighs the public interest in disclosing the information.

 

10.2    The 5 Pension Board Members left the public gallery.

 

Items 11 to 14 were exempt from the press and public.

11.

Exempt Minutes 10/9/18 / Cofnodion Eithriedig 10/9/18

12.

Exempt Minutes of the Local Pension Board 24/10/18 / Cofnodion wedi eu Heithrio'r Bwrdd Pensiynau 24/10/18

13.

Ongoing Monitoring Of Performance For Multi-Asset Funds / Monitro Cyfredol o Berfformiad ar gyfer Cronfeydd Aml-Ased

14.

Wales Pension Partnership Update / Diweddariad ar Bartneriaeth Pensiynau Cymru