Agenda item

This report provides the following updates on the Pension Fund’s performance for the quarter ended 31 March 2022:

·         Independent advisor’s market commentary

·         Investment asset allocation

·         Investment performance

·         Funding position update

·         London Collective Investment Vehicle (LCIV) update

·         External audit update

The Head of Pensions and Treasury introduced the report which provided an update on the Pension Fund’s investment performance for the quarter ended 31 March 2022.

It was noted that the Pension Fund’s investment assets had a market value of £1.795 billion which was a decrease of 1.16% from the previous quarter in December 2022.The portfolio allocation for the Pension Fund was set out in table 1 of the report and this also provided a comparison against the strategic allocation. It was noted that the Pensions Committee and Board had decided to adjust the weightings to property investment managers and to invest an additional £30 million in the Aviva Lime Property Fund in April 2022.

In relation to a query about investing in property with social impact, Alex Goddard, Mercer, explained that this had been considered by the Pensions Committee and Board. It was noted that social housing had a reasonably long lead time for investment and would not have rebalanced the investment portfolio to bring it back in line with the strategic asset allocation. It was noted that social housing options could be considered as part of the upcoming investment strategy review. The Head of Pensions and Treasury noted that the Pension Fund was invested in the London Collective Investment Vehicle (LCIV) London Fund which provided some degree of social impact in the Pension Fund’s investment portfolio.

It was enquired whether the Pension Fund had any involvement with sustainable or ‘green’ buildings or with warehouses and distribution centres, which were currently considered to be beneficial, within the property sector. Alex Goddard, Mercer, noted that Aviva was rated highly on the incorporation of Environmental, Social, and Governance (ESG) issues. They did not have a specific objective on sustainability but did undertake some active work and the portfolio was well diversified. It was added that Aviva did have investments in some warehouses.

In relation to member training, it was stated that the training programme provided by Hymans Robertson was well-regarded and used by a number of Local Government Pension Schemes. It was noted that there would be a cost to access the training programme but that this was not anticipated to be a barrier.

Some members noted that the Pensions Committee and Board would normally consider the annual report and accounts at its July meeting and enquired about progress. The Head of Pensions and Treasury explained that it had been difficult to achieve the timelines, primarily as a result of the impact of the Covid-19 pandemic. It was noted that the external audit from the previous year was not yet completed but that work was underway with the auditors and it was anticipated that there would be a draft for the September meeting. It was confirmed that the deadline to have draft accounts published was 31 July but that the Regulations allowed for delays for a reasonable reason. It was highlighted that this issue was not specific to Haringey and that only 9% of authorities met the deadline in 2021.

It was enquired whether the Pension Fund had any other asset classes which may be able to mitigate the impact of inflation. Alex Goddard, Mercer, noted that the market view of inflation had been consistently wrong over the last 12 months and it was now anticipated that it would top out at approximately 11%, rather than 4-5%. It was noted that the Bank of England target was 2% and that, if inflation did not reduce, it was likely that interest rates would be raised. It was considered that the Pension Fund was fairly well protected against inflation, with real assets and index linked gilts that were linked to inflation, but that this would likely be considered as part of the Investment Strategy Statement review.

RESOLVED

To note the information provided in section 6 of the report in respect of the activity for the quarter ended 31 March 2022.