Agenda and minutes

Pensions Committee
Monday, 16th December, 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       No apologies were received.

 

1.2       The Chair confirmed that he would be leaving the meeting early in order to attend a funeral and the Committee agreed that Cllr Peter Jones would take over as Chair at that point.

 

1.3       The HoP introduced the PIM, who had been recently appointed.

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 and son-in-law. Wife is a deferred member

Veronica Crick

Husband

Self

Peter Jones

Wife

Self and wife

Raymond Williams

NONE

Partner and daughter

 

2.2       The CLO left the meeting.

3.

Minutes 9/9/19 / Cofnodion 9/9/19 pdf icon PDF 445 KB

Minutes:

3.1       The minutes of the meeting held on 9 September 2019 were confirmed as an accurate record.

4.

For information: draft minutes of the Pension Board meeting of 23/10/19 / Er gwybodaeth: Cofnodion drafft cyfarfod y Bwrdd Pensiynau 23/10/19 pdf icon PDF 523 KB

Minutes:

4.1       The Committee noted the minutes.

5.

Wales Pension Partnership Pooling Update / Y Diweddaraf ar Gyfuno Partneriaeth Pensiynau Cymru pdf icon PDF 313 KB

Minutes:

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

  • Regarding Tranche 2 – UK and European Equities, £420 million had been moved into the UK pool on 23 September 2019 and its value had climbed to £433 million. Performance was ahead of the benchmark in this area; however the full performance figures were not yet available.
  • Following the above, £33 million had initially remained with Lazard, who had provided helpful insight in terms of investment positioning in light of the UK elections.
  • Tranche 3 – Fixed Interest – Structure and Manager Composition was likely to be launched in February 2020.
  • Tranche 4 – Emerging Markets and Tranche 5 – Alternative Investments (Private Markets) were quietly progressing.
  • Transition costs impacted upon immediate performance.

 

5.2       The DIIA suggested that it was important to monitor and assess the role of the Custodian in terms of the timing and techniques used around moving stocks.

 

5.3       The Pensions Committee agreed to note the content of the report.

 

5.4       Cllr Huw Bevan entered the meeting.

6.

Quarterly Investment Performance Report to 30/9/19 / Adroddiad Perfformiad Buddsoddi Chwarterol 30/9/19 pdf icon PDF 999 KB

Additional documents:

Minutes:

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

  • The Fund reported a positive investment return of +1.82% for the quarter, with an increase in assets from £3,058 million at 30 June 2019 to over £3,112 million at 30 September 2019. The above represented a slight underperformance against the benchmark.
  • The value of the Fund had reduced to £3,074 million at the end of October 2019; however it had increased to £3,131 million at the end of November 2019.
  • Markets had been influenced by trade discussions between the US and China, as well as issues around Brexit, with some concerns regarding slowing global growth.
  • £420 million of investments had been moved from Lazard to the Wales Pension Partnership (WPP). The amount held by Lazard had now reduced to £1 million, which was invested in the Stobart Group and the shares would be relisted in the New Year following a successful rescue package of the company.
  • During the transition of investments it was possible that funds could suffer from market risks, due to increased transaction costs and being out of the market for a limited period of time.
  • Investment performance was positive during the last quarter and the last year; however it was slightly below the benchmark.
  • The Blackrock European Equity Fund had suffered a particularly negative quarter, underperforming its benchmark for the second successive quarter; however the HoP reminded everyone that these investments would be moved into Alternatives in due course.
  • The majority of investment managers had outperformed their benchmarks during the quarter; however consideration would need to be given to the investment strategy attributed to Invesco, who had slightly underperformed its benchmark.
  • The WPP Global Opportunities Equity Sub Fund had completed its second full quarter of trading and had finished ahead of the benchmark with outperformance of +0.53% during this quarter.

 

6.2       The IIA provided the following headlines from Appendix 1 of the report:

  • Markets around the world had experienced a mixed quarter, with record highs seen in the US, compared to record lows in Europe in terms of growth and interest rates.
  • Following the UK elections, Sterling had rallied and hopefully the uncertainty around Brexit would become clearer.
  • The US was the fulcrum of global markets, with the US Dollar being the strongest global currency.
  • The recent changes to the UK Stewardship Code meant that funds would need to demonstrate their adherence to Environment, Social and Governance (ESG) issues.
  • The European Central Bank key rate had reported a record low, as shown in the table at the bottom of page 60 of the agenda.
  • News flow impacted the market, with the quarter seeing “a traffic jam of noise and data”.

 

6.3       Following questions from the Committee, the HoP, the IIA and the DIIA made the following points:

  • The IIA was sceptical regarding the level of progress seen between the US and China, suggesting that President Trump had merely reversed his decisions around tariffs to their original position before he became President.
  • The IIA expected investment  ...  view the full minutes text for item 6.

7.

Pension Fund Investments; Towards Broader Diversification / Buddsoddiadau'r Gronfa Bensiwn; Tuag at Arallgyfeirio Ehangach pdf icon PDF 281 KB

Minutes:

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

  • At the meeting held on 9 September 2019 the Pensions Committee agreed a significant change in their Strategic Asset Allocation for the Fund’s investments.
  • Officers had been requested to produce a more detailed implementation report of how to action the development of the increased weighting to Alternative asset categories.
  • In advance of any further report being brought back to Committee, it was considered sensible to provide members of the Committee with an early insight into the different asset classes that might form component parts of a future blended Alternatives strategy. This would be done by way of a presentation.

 

7.2       The IIA and the DIIA delivered a presentation, as outlined above.

 

7.3       The Chair (Cllr Caron) left the meeting. Cllr Jones took over as the Chair.

 

7.4       Following questions from the Committee, the HoP and the DIIA made the following points:

  • The HoP reminded members of the Committee that the long-term request from Central Government was for 100% of the Fund’s investments to be made via the WPP; however he acknowledged that the investment options available through the WPP may not always meet the Fund’s requirements, and therefore investments outside of the WPP may need to be considered.
  • The HoP confirmed that only sensible investment proposals with sufficiently strong returns would be tabled for the Committee’s consideration, and the thresholds identified by the Actuarial Valuation would play an important role in this process.
  • The HoP explained the importance of cash management, as cash needed to be available to pay such things as benefits and investment fees. With this in mind, some money could be reinvested by investment managers; however some would need to be returned to the Fund. He added that multi asset funds were quickly tradeable and would therefore assist with the above.
  • In terms of investments in infrastructure, the DIIA suggested that it may be sensible to invest in a mixture of local and wider projects. The HoP added that Central Government had previously encouraged investments in infrastructure; however this had recently eased off.
  • The HoP acknowledged that the Fund could invest in infrastructure individually; however it was a specialist area that may be best served via opportunities through the WPP.

 

7.5       The Pensions Committee agreed to note the content of the report and the related presentation.

8.

Actuarial Valuation Summary Results / Canlyniadau Crynodeb Prisio Actiwaraidd pdf icon PDF 410 KB

Minutes:

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

  • The purpose of the 2019 Valuation was to assess the overall funding level of the Fund, to ensure that there were sufficient assets in the Fund to cover the pension benefits accrued and to set the employer contribution rate for the three year period commencing 1 April 2020.
  • The demographic assumptions, financial assumptions and investment returns were outlined in paragraphs 5 and 6 of the report respectively.
  • There had been a significant improvement in the reported funding level of the Fund from 72% in 2016 to 86% at the 2019 Valuation and a reduction in the funding deficit from £850m to £478m.
  • The Fund had experienced better than expected investment returns since the 2016 Valuation, with the figures provided in the table in paragraph 8.2.1 of the report.
  • The areas of membership experience that had the greatest impact on the surplus / deficit position of the Fund could be seen in the table in paragraph 8.4.1 of the report.
  • A letter would be sent to each of the participating employers setting out their position as at the Valuation date, to include an individual schedule of their results, in the week commencing 16 December 2019. An employer meeting would also be held on 24 January 2020, which the Actuary would be attending.
  • The McCloud case was still ongoing and as a result the Actuary’s approach would be guided by the advice from the Scheme Advisory Board on 14 May 2019, outlined in paragraph 11.4 of the report.

 

8.2       The Pensions Committee agreed to note the content of the report.

9.

Voting at Company Meetings on behalf of the Pension Fund / Pleidleisio mewn Cyfarfodydd Cwmnïau ar ran y Gronfa Bensiwn pdf icon PDF 277 KB

Minutes:

9.1       This agenda item was considered straight after agenda item 4, in order for the Chair (Cllr Caron) to be part of the discussion before he left the meeting early.

 

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

  • Within the Fund’s Responsible Investing Policy framework was the requirement that the Fund would engage with companies that it invested in to influence behaviours around matters relating to ESG issues.
  • Voting at company meetings formed a very important part of the Governance strand mentioned above, and the Fund did this in large part through policies of its managers but also via its work with the Local Authorities Pension Fund Forum (LAPFF), of which the Chair was a member of its Executive Committee.
  • The report sought to authorise the Chair to vote on behalf of the Fund when the opportunity arose and in accordance with the overall policies of the Fund.

 

9.3       The Chair explained that he had attended company meetings and asked questions on behalf of the LAPFF; however the LAPFF had requested that he attended meetings in future on behalf of the Greater Gwent (Torfaen) Pension Fund, as well as the LAPFF.

 

9.4       The DIIA stated that it was very valuable for the Fund to evidence how it was engaging with companies regarding ESG issues.

 

9.5       The Pensions Committee agreed:

(i)   For the Chair of the Committee to attend such company meetings where required or where requested to in order to represent the Fund and also on behalf of the LAPFF; and

(ii)Where the Chair does attend such meetings, he is authorised to vote on behalf of the Fund provided that any such votes are consistent with the Responsible Investing Policy framework of the Fund and is deemed to be in the Fund’s best interests.

10.

UK Stewardship Code and the LGPS / Cod Stiwardiaeth y DU a ChPLlL pdf icon PDF 307 KB

Minutes:

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

  • The Financial Reporting Council had published the updated UK Stewardship Code, which would take effect from 1 January 2020. The Code represented a new best practice standard for both asset owners and asset managers alike.
  • The key changes in the Code were outlined in paragraph 4.2 of the report.
  • The Fund was aware that the Code was being changed and decided to wait for the newer version before consideration was given to signing up to it. The HoP added that guidance that funds sign up to the Code was being led on a national level.
  • The report recommended that this matter be referred to the Responsible Investor Working Group (RIWG) for them to progress and report back in due course.

 

10.2    The IIA left the meeting.

 

10.3    Members fully supported the prospect of the Fund signing up to the Code and Cllr Bevan added that there were big issues around climate change that required consideration.

 

10.4    The Pensions Committee agreed to note the content of the report and refer this matter to the Responsible Investor Working Group for them to progress and report back in due course.

11.

Wales Pension Partnership; Joint Governance Committee Deputising Arrangements / Partneriaeth Pensiynau Cymru; Trefniadau Dirprwyo'r Cydbwyllgor Rheoli pdf icon PDF 265 KB

Minutes:

11.1    The HoP confirmed that Cllr Joanne Gauden had previously been appointed to deputise for the Chair to attend meetings of the Wales Pension Partnership Joint Governance Committee (JGC), in the event that the Chair of Pensions was unable to attend but considered it necessary for the Fund to be represented at the JGC at elected member level. However, as Cllr Gauden had stepped down from the Pensions Committee, due to her being appointed to the Cabinet, the report recognised the current position.

 

11.2    The Pensions Committee agreed to note:

(i)   That there was a requirement to seek a new member of the Pensions Committee as 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 was unable to attend but considers it necessary for the Fund to be represented at the JGC at elected member level;

(ii)That the Chair would consider this issue as required; and

(iii)                That the Chair would inform the Committee in due course of the deputising arrangements.

12.

Elected Members - Continuing Professional Development Update / Diweddariad Parhau Datblygiad Proffesiynol - Aelodau Etholedig pdf icon PDF 281 KB

Minutes:

12.1    The HoP presented the report and confirmed that it provided an update and drew attention to forthcoming events.

 

12.2    Cllr Bevan stated that he would like to see more training available regarding the new investment classes being explored by the Fund, and officers agreed to consider this request.

 

12.3    The Pensions Committee agreed to note the training update provided within the report.

13.

Date of Next Meeting 9/3/20 / Dyddiad y Cyfarfod Nesaf 9/3/20

Minutes:

13.1    The next meeting is scheduled to take place on 9 March 2020.

14.

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:

14.1    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.

 

14.2    Cllr Jones invited the five members of the Pension Board to remain in the public gallery.

15.

Exempt Minutes 9/9/19 / Cofnodion Eithriedig 9/9/19

Minutes:

15.1    The exempt minutes of the meeting held on 9 September 2019 were confirmed as an accurate record.

16.

Exempt Minutes of the Local Pension Board 23/10/19 / Cofnodion wedi eu Heithrio'r Bwrdd Pensiynau 23/10/19

Minutes:

16.1    The Committee noted the exempt minutes.

 

16.2    The HoP confirmed that he would be retiring in June 2020 and that his post had been advertised as a result.

 

16.3    The meeting ended at 12.15pm.