Agenda and minutes

The Chair welcomed everyone to the meeting.

At this point in the meeting declarations of interest are received from Members in any of the agenda items under consideration at the meeting. Members are asked to complete the green interest forms circulated to groups in their pre-meetings (which will be announced at the Council Meeting) to indicate:

(a) The agenda item number in which they have an interest to declare.

(b) The nature of their interest.

(c) Whether their interest is a disclosable pecuniary interest or an other interest,  (as defined in Part 2, A and B of the Code of Conduct and Rules for Registration of Interests)

Any Member who needs to clarify any matters relating to the declaration of interests is recommended to seek advice from the Council’s Monitoring Officer or a member of his staff before the meeting to expedite dealing with the item during the meeting.

There were none.

There were none.

The Chair announced that he had agreed that the Panel should receive an update from our advisors / officers regarding the financial markets following the mini budget announcement made by the Government last week.

The Panel, having been satisfied that the public interest would be better served by not disclosing relevant information, RESOLVED, in accordance with the provisions of the Section 100(A)(4) of the Local Government Act 1972 that the public should be excluded from the meeting for this item of business, because of the likely disclosure of exempt information as defined in paragraph 3 of Part I of Schedule 12A of the Act as amended.

There were none.

There were none.

The Panel approved the minutes of the previous meeting.

The Committee discussed Impact Investing at its meeting in December 2021. It was agreed that the topic would be explored further as part of the Strategic Investment Review in 2022/23.

The Group Manager for Funding, Investment & Risk introduced the report to the Panel. She explained that the Committee had previously discussed Impact Investing at its meeting in December 2021 and had agreed that the topic would be explored further as part of the Strategic Investment Review in 2022/23.

She added that they were still awaiting the consultation for the draft guidance on Levelling Up from DLUHC so any decisions may be impacted once the guidance is published.

She said that officers have been working alongside Mercer to understand what would be possible on a local / national level and that conversations have been held with both Brunel and Foresight. She added that further work will need to be done prior to the strategic review in 1Q23.

The Panel, having been satisfied that the public interest would be better served by not disclosing relevant information, RESOLVED, in accordance with the provisions of the Section 100(A)(4) of the Local Government Act 1972 that the public should be excluded from the meeting for this item of business, because of the likely disclosure of exempt information as defined in paragraph 3 of Part I of Schedule 12A of the Act as amended.

The Panel were minded to note:

(i)  The report from Mercer.

(ii)  That officers will undertake feasibility studies of local / social impact opportunities to inform asset allocation decisions at the Strategic Review.

The Panel have requested the draft TCFD report be shared prior to it being approved for publication by the Committee to give members an opportunity to review the content and make suggestions/recommendations as necessary.

The Investments Manager introduced the report to the Panel. He explained that the Committee had approved the report last week and that the Communications Team were doing a final revision of it prior to publication.

He added that the Fund is due to respond on this matter to the DLUHC in due course.

The Panel is minded to note the draft 2021/22 Taskforce on Climate-related Financial Disclosures Report with it having been approved by the Committee at its September meeting.

This paper reports on the performance of the Brunel and legacy portfolios and seeks to update the Panel on routine aspects of the Fund’s investments. The report contains performance statistics for periods ending 30 June 2022.

The Investment Manager introduced the report to the Panel.

Steve Turner, Mercer addressed the Panel and referred them to page 100 of the agenda pack. He explained that the chart shows the attribution performance of the Fund for 12 months to June 2022.

He said that it has been a challenging period for investment markets due to the high rise in inflation. He added that as a result in the rise of bond yields this has seen a negative performance in equity markets.

He explained that the Dynamic Equity Protection Strategy remains a positive initiative for the Fund as although since implementation equity markets have gone down around 10%, this is only 8% in real terms. He added that the currency hedging policy would need to be reviewed at some point.

Pauline Gordon asked what proportion of schemes / quantum of assets were not able to fulfil their LDI commitments and whether that would lead to a demand in long lease property or alternative matching assets.

Steve Turner replied that anecdotally, clients that have bespoke segregated arrangements in place have been able to react to events more quickly over the past week and have not had to reduce hedging levels. He added that in terms of long lease property we need to be mindful of the number of private sector schemes that might be looking to either buy in or buy out.

He said that Brunel were one of the largest purchasers of long lease property assets in recent times.

The Group Manager for Funding, Investment & Risk asked why the pooled LDI funds took the decision to de-gear the leverage – was it due to a lack of available funds or accessing collateral from their clients.

Steve Turner replied that it was probably a combination of both, but said that this did not happen to all pooled LDI funds. He added that some managers were simply not able to buy the Gilts they wanted to and that the Bank of England were only able to purchase £1 billion from a target of £5 billion.

The Panel were minded to:

(i)  Note the information as set out in the reports.

(ii)  Identify any issues to be notified to the Committee.

The Funding and Risk Management Group (FRMG) is responsible for agreeing the operational aspects relating to the Fund’s Risk Management Framework (RMF) thereby ensuring that strategic objectives continue to be met. This report informs Panel of issues considered and decisions made by FRMG as well as any recommendations.

The Investment Manager introduced the report to the Panel.

The Panel, having been satisfied that the public interest would be better served by not disclosing relevant information, RESOLVED, in accordance with the provisions of the Section 100(A)(4) of the Local Government Act 1972 that the public should be excluded from the meeting for this item of business, because of the likely disclosure of exempt information as defined in paragraph 3 of Part I of Schedule 12A of the Act as amended.

The Panel was minded to note:

(i)  The performance of each of the underlying RMF strategies

(ii)  The decision by FRMG to adjust the inflation trigger framework to reflect the RPI/CPI difference

(iii)  The ongoing FRMG consideration regarding the hedge ratio of the LDI portfolio

(iv)  That the FRMG may consider adjusting the interest rate trigger framework to reflect current market conditions so that the Fund hedges at attractive levels.

This report sets out the forward agenda for the Panel for 2022/23. It is provisional as the Panel will respond to issues as they arise and as work is delegated from the Committee.

The Investment Manager introduced the report to the Panel. He informed them that a provisional list of agenda items for the 25^th November 2022 meeting were listed within the report.

The Panel were minded to note their forward agenda.