Agenda item

Review of the Chief Operating Officer to bring back a report from Mercer highlighting possible changes to the fund’s investment strategy, further to the decision at the 9^th February meeting of the Pensions Committee and Board to commission a review of the pension fund’s investment strategy.

The Committee and Board considered the report on the Investment Strategy Review, and the content of the exempt report as introduced by Mercer. The report set out a number of different options for the fund’s investment strategy, and also suggested that the issue of liability risk be revisited by the Committee and Board following the completion of the actuarial advisor review process.

The Committee and Board discussed options around Multi-Asset Absolute Return (MAAR), and noted performance relating to two MAAR managers currently available with the London Collective Investment Vehicle (CIV), as well as performance for this asset class more widely. It was noted that these managers were active fund managers, as opposed to passive, and would be expected to achieve overall performance of around cash plus 4% - the difference in fee payable to such managers and the fee for passively-managed equities was noted, but also compared with the respective expected performance outcomes. The Committee and Board expressed an interest in this area, and it was suggested that a meeting be set up for members of the Committee and Board to meet with the managers available with the CIV on an informal basis.

The Committee and Board considered the infrastructure debt allocation; it was noted that this was likely to remain underweight compared to target, and the Committee and Board considered options for addressing this position. Of the options proposed, the Committee and Board expressed a preference to top up the CQS Multi-Asset Credit portfolio, a benefit of which was that the instruction could be implemented immediately.

The Committee and Board looked at ESG considerations. It was noted that compared with other funds, the Fund was very advanced in its consideration of such matters, and further options for developing this approach included investing in an active global sustainability equity strategy, considering an ESG index as the benchmark for the core passive equity exposure and investing in strategies designed to have a positive social impact as well as strong financial returns. It was noted that a separate report on positive social impact investment opportunities would be brought back to the next meeting of the Committee and Board for consideration. The Committee expressed an interest in considering an ESG index for the passive equity exposure, and requested performance information and further details in relation to this option.

RESOLVED

i)             That the Committee and Board consider the proposals outlined by Mercer in appendix 1 to the report.

ii)            That the Committee and Board agree to implement the proposal to reduce the benchmark allocation to Allianz to 3% and increase the strategic allocation to the CQS Multi-Asset Credit Strategy to 7%, with rebalancing from the current overweight equity portfolio.

iii)           That further information be brought to the next meeting of the Committee and Board with regard to ESG indices for the passive equity portfolio, and on opportunities for social impact investing.

iv)           That members of the Committee and Board be provided with an opportunity to meet with the MAAR fund managers available with the London CIV, prior to the next formal meeting of the Committee and Board.