Agenda item

This report provides the Pensions Committee and Board (PCB) with the following updates on the Pension Fund’s performance for the quarter ended 30This report provides the Pensions Committee and Board (PCB) with the following updates on the Pension Fund’s performance for the quarter ended 30 September 2023:

a.       Independent advisor’s market commentary

b.       Investment performance

c.       Investment asset allocation

d.       London Collective Investment Vehicle (LCIV) update

e.       Funding position update

Tim Mpofu introduced the item. This report provides the Pensions Committee and Board (PCB) with the following updates on the Pension Fund’s performance for the quarter ended 30 September 2023.

a. Independent advisor’s market commentary

b. Investment performance

c. Investment asset allocation

d. London Collective Investment Vehicle (LCIV) update

e. Funding position update

The following was noted in response to questions from the committee:

• Investments in the London CIV were approximately 76% of total fund assets The funding position as of 30th of November had been included in the confidential appendix. The funding position for the pension fund was 139%, as per the Fund Actuary’s latest estimates.
• Cllr Iynkaran questioned the performance of the portfolio. Tim Mpofu explained that there were assets within the portfolio that had not performed as expected due to the changes in economic conditions. The Fund’s allocation to Index Linked Gilts was an example of one of the asset classes that had underperformed. Although inflation had increased, the impact from the increase in interest rates had resulted in significant mark-to-market capital losses. There were also some asset classes that were not revalued on a regular basis, and as a result there would be a lag in terms of their performance. It was further noted that although property had underperformed during the period, it was still considered appropriate for the Fund due to its payment of distributions and income generation characteristics.
• Keith Brown flagged that he would caution about putting too much emphasis on the total fund performance relative to the total fund benchmark. This was because for quite a few of the asset classes, they were quite difficult to benchmark as well as being lagged.
• In response to a query regarding performance reporting, Tim Mpofu suggested that the team could work on different models and explore how the existing performance reporting could be further improved. Traditionally, the fund’s approach had been to use the Fund’s benchmark as a means of checking whether the asset manager was delivering on their performance objectives. It did not necessarily attribute the performance of the Committee and Board’s own investment decision making process.
• The Chair sought clarification from Mercer in relation to private debt and whether this should be something still investigated. He also flagged if there could be a report of other asset classes for future investment strategies. Alex Goddard, Mercer, explained that private debt continued to be an asset class that investment managers spoke to LGPS funds about and it was at a floating rate. As interest rates have gone up there, returns had gone up as well. This is why some had seen it as appealing, and it would fit within that diversifying alternatives bucket. The question would be, if the committee were going to look to allocate this, where they would allocate this from. That would be a discussion that needed to be had across a range of asset classes.

Cllr Mark Blake attended the committee and read out a statement:

Cllr Blake expressed, in his view, that the local government pension scheme continued to hold 4.6 billion pounds in investments in companies which were operating in Israel & Palestine. He asked what actions the committee had taken to divest Haringey pension funds from these companies.

Cllr Mahbub acknowledged this statement and confirmed that a fuller response to the letter referenced in his statement would be provided after the PCB had had an opportunity to consider its contents.

RESOLVED

To note the information provided in section 6 of this report regarding the Pension Fund’s investment performance and activity for the quarter ended 30 September 2023. An additional supplementary appendix has been included which shows the Pension Fund’s asset values as of 30 November 2023.