Agenda item
Investment Update
The Group Manager for Funding, Investment & Risk will provide the Board with a verbal update on this item.
Minutes:
The Group Manager for Funding, Investment & Risk addressed the Board and highlighted the following issues to them.
She informed them that a preferred manager had been identified to carry out the SME (Small & medium sized enterprises) strand of the Local Impact portfolio and that the due diligence process was ongoing.
She explained that the government is consulting the LGPS on further changes to how our investment assets are managed. She said that the proposals embed pooling and extends the role of the FCA regulated pool company in managing our assets.
She stated that the proposed changes are highly material and broadly cover three areas:
· Reforming LGPS asset pools
· b) Boosting LGPS investment in their localities and regions of the UK
· c) Strengthening governance of both LGPS and pools
We do not agree that administering authorities should be required to transfer legacy illiquid investments to the management of the pool as it has not been made clear the benefit to the pool company or the AA of transferring illiquid, closed ended funds being wound down to expiry.
We do not agree that the pool should provide investment advice on the investment strategies of its partner AAs as conflicts of interest may arise if pools provide strategic advice and implement the strategy. Therefore, LGPS funds should not be required to take strategic advice from the pool company. Whilst AAs may wish to obtain strategic advice from the pool company, they must be able to access independent high-level strategic advice.
She explained that the Avon Pension Fund Committee will still set the Investment Strategy.
She said that the deadline for responses from the Fund was 16th January 2025 and from the Pools by 1st March 2025. She added that, at this stage, any changes were anticipated to commence from 1st April 2026.
Jon Evans asked who decides on which pools will pool together.
The Group Manager for Funding, Investment & Risk replied that in 2016 Avon voluntarily decided to become a pool with 7 other authorities within the South West that had already been working collaboratively together since 2003.
She added that work on the Investment Strategy would begin early in 2025 and that it would need to be established how the approach to ESG would work under these new proposals.
Jon Evans commented that the estimated funding level of the Fund was 102% and asked if other funds within the pool were of a similar level.
The Group Manager for Funding, Investment & Risk replied that all have different Actuaries that provide a value of their liabilities. She added that these assumptions are reviewed and adjusted as markets change. She said that the Fund’s current level enables stable contributions to be made by employers.
Steve Harman asked if any overall governance changes were planned as part of the consultation.
The Group Manager for Funding, Investment & Risk replied that there were not really any at this stage.
The Chair commented that he had read reports from other Pension Board’s relating to the issue of Brunel’s investment performance.
The Group Manager for Funding, Investment & Risk said that this was in relation to their Equity Portfolios and them being underweight to the ‘Magnificent 7’ large technology companies. She added that conversations have been held with Brunel as to whether now would be the right time to make any changes.
The Chair thanked the Group Manager for Funding, Investment & Risk for her update on behalf of the Board.