Agenda item

Review of Investment Performance for Periods Ending 30 June 2020

This paper reports on the performance of the Fund’s investment managers and seeks to update the Panel on routine aspects of the Fund’s investments. The report contains performance statistics for period ending 30 June 2020.

 

Minutes:

The Investments Manager introduced this report to the Panel. He said that following the conclusion of the 2019/20 investment strategy and the resultant asset allocation changes, officers have been working with Mercer and the Fund’s Custodian to revise the strategic benchmark that the Fund uses to benchmark total performance.

 

He added that officers and Mercer continue to work with the Custodian to

explore options for integrating the Fund’s FX overlay programme into the

strategic benchmark in a cost-efficient manner.

 

Steve Turner, Mercer referred the Panel to page 20 of Appendix 2 and said that there had been a huge rally in all assets, especially Global Equity and forms of credit. He added that funding was only 2-3% below the recovery plan.

 

He referred to the divergence in returns across sectors during the pandemic, noting strong performance in the technology sector which represents c.20% of the global market and cautioned that the oil & gas sector, which dominates the UK market, could face headwinds as low carbon energy solutions continue to gain traction.

 

He suggested that as much of the portfolio had now transitioned to Brunel that it would be a good time to consider the style of the performance report moving forward.

 

The Group Manager for Funding, Investment & Risk agreed and said they should meet and agree the best way to do that, including their attendance at future meetings.

 

Pauline Gordon said that the Blackrock performance figure was wrong as it should be in-line with benchmark in its passive equity. She added that there was also a similar issue last quarter.

 

The Investments Manager replied that Mercer were sweeping up a legacy passive sleeve which accounts for a slight discrepancy. He added that an update would be provided on this at the Committee.

 

Pauline Gordon asked if any details could be given as to why Partners Property were behind nearly 10% over 3 months.

 

Ross Palmer, Mercer replied that the number showing for Partners is actually lagged by a Quarter and that the figure for Q2 was 3.4%.

 

John Finch asked how much of the Global Equity Portfolio was either local market or local currency in terms of excess returns.

 

Steve Turner replied that it was all local currency. He added that one of the long-term managers, Baillie Gifford had outperformed by around 30% over the Quarter. He said that they have largely benefitted from their holdings in digital and e-commerce companies such as Tesla, Amazon, Shopify, Nintendo and Zoom.

 

The Chair highlighted that during the quarter Brunel published their first Responsible Investment and Stewardship Outcomes Report, which evidences policy commitments on ESG risk integration, engagement and stewardship activities.

 

He added that the shareholder resolution that Brunel co-filed with ShareAction

requesting that Barclays publish a plan to phase out the provision of financial

services to non-Paris aligned oil and gas companies led to the company publicly

stating an ambition to become net zero by 2050. The shareholder resolution itself won significant minority support.

 

The Panel RESOLVED to note the information as set out in the reports.

Supporting documents: