Agenda item

The Panel are asked to consider the proposed framework to recommend to the Committee at its meeting on 22nd September 2023.

The Group Manager for Funding, Investment & Risk introduced this report to the Panel. She stated that a robust decision making framework was required, one that would enable quick and timely decisions to be made. She said that the Panel’s recommendation would then be presented to the Committee.

She explained that where possible all assets would be managed by Brunel, but that this may depend on size or nature of the asset concerned.

She said work was already progressing on the Schroders Greencoat opportunity that was presented to the Panel in July.

John Finch asked how realistic was it that Brunel will be able to create the portfolios that we are seeking.

The Group Manager for Funding, Investment & Risk replied that she felt that in time they could be able to create a vehicle that could support this work more fully and at the same time be cost effective for them.

Jackie Peel referred to page 23 of the agenda and asked about the Fund’s overall return objective of c. 6.5%, net of fees over a 10-year period. She asked at what point could the returns be assessed.

Steve Turner, Mercer replied that performance of the portfolio will be reported over time, but that in principle the concept will be like infrastructure assets already held. He added that this will likely be shown as a J-curve, with initial negative returns before positive returns could be seen after 4-6 years.

The Group Manager for Funding, Investment & Risk added that the monitoring of Private Markets is a difficult issue and said that they would also be monitoring the expected return information given to them by the Fund Manager.

The Head of Pensions commented that for some private investments, depending on the stage at when our investment is made, there maybe a build / development phase and therefore a different report structure will be required that shows figures in relation to budget and timescales.

The Chair referred to the Geographic Coverage section of the report and asked for an explanation of what was meant by the word ‘material’.

Steve Turner replied that when the design parameters were first discussed they said that the portfolio would be a mixture of South West specific funds and UK diversified strategies with a 15 – 20% South West element. He added that Greencoat was 100% South West specific.

He said that a great deal of flexibility is needed to find suitable opportunities in the area.

Pauline Gordon asked if it was known which Funds were interested in investing at this stage.

Steve Turner replied that the principle Funds were Avon and at least one other fund and that the investment could be in the region of £100m - £150m. He said that this would be sufficient to get the strategy off the ground and felt that they have a strong pipeline of assets in place.

John Finch commented that he was aware of more managers investigating options for similar types of investment.

Councillor Chris Dando asked for clarification on what was meant by making a quick decision.

The Group Manager for Funding, Investment & Risk replied that decisions were not likely to fall into line with the current meeting cycles as meetings may be required to take place at short notice. She added that this is why the flexible / hybrid model has been included in the options.

Councillor Dando said that he would welcome any emerging options to be shared with the Panel informally prior to the delegated Working Group making an actual decision. He added that there needs to be a transparency to the process.

Jackie Peel said that flexibility would be required to enable timely decisions to be made with speed and agility and would therefore support Option 3.

Pauline Gordon asked if this was comparable with the work undertaken for the Risk Management Framework.

The Group Manager for Funding, Investment & Risk replied that the FRMG don’t make strategic decisions and that their remit is set out in the Committee’s Terms of Reference.

Councillor Dando said that he felt a flow chart of the process would help.

The Director, One West commented that clarity was needed on where and how decisions will be made. He said that he felt that Option 3 was a good fit and if chosen should be reviewed after 12 months. He added that all decisions of the Working Group would be reported to the Panel, but it would not be eligible to re-decide them.

The Group Manager for Funding, Investment & Risk said that if timely they would bring options to a scheduled meeting of the Panel.

The Head of Pensions said that the proposed configuration of the Working Group would be 3 Investment Panel members and 3 officers, with decisions being taken solely by the Panel members.

The Chair asked that the points made today by the Panel are conveyed to the Committee prior to them meeting.

The Investment Panel RESOLVED to agree that Option 3 (Delegate to a Working Group of Panel members and officers) be chosen as the Local Impact Portfolio Framework to be recommended to the Avon Pension Fund Committee.