Agenda and minutes
Venue: Boardrooms 3, 4 and 5 - Brent Civic Centre, Engineers Way, Wembley, HA9 0FJ
Contact: Toby Howes, Senior Democratic Services Officer 0208 937 1307, Email: toby.howes@brent.gov.uk
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Declarations of personal and prejudicial interests Members are invited to declare at this stage of the meeting, any relevant financial or other interest in the items on this agenda. Minutes: None declared. |
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Minutes of the previous meeting held on 19 November 2013 PDF 74 KB The minutes are attached. Minutes: RESOLVED:-
that the minutes of the previous meeting held on 19 November 2013 be approved as an accurate record of the meeting. |
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Matters arising Minutes: None. |
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Presentation by Henderson - Total Return Bond Fund Members will receive a presentation by Henderson representatives on the Total Return Bond Fund. Minutes: Mark Fulwood (Henderson Global Investors) began the presentation by advising that the economic data for 2013 had shown encouraging improvement overall, particularly for countries such as the USA and the UK, although some areas such as the EU continued to struggle. Members noted that Government bonds (Gilts) and emerging markets had been the lowest performers, whilst high yield investments and secured loans had been the highest. The market had seen investors encouraged to take more risks for higher yields. The committee heard that in 2012, UK Gilt yields had hit their lowest ever since records had begun and this was due to low interest rate and borrowing costs and the Government undertaking quantitative easing. Meanwhile, a fall in global interest rates since 2008 had led to a strong performance from high quality investment grade UK corporate bond yields.
Kevin Adams (Henderson Global Investors) then described the Total Return Bond Fund that they operate on behalf of the Brent Pension Fund that aims to achieve an average return of 6% per annum over a three to five year rolling period. He explained that the previous portfolio had focused on UK Gilts and corporate bonds. Under the Total Return Bond Fund portfolio introduced in April 2012, there is a broader range of investments that offer good returns whilst providing the ability to protect capital. Members noted the present asset allocation of the Brent Pension Fund’s investment portfolio and that the duration of 0.9 years helped protect the council’s investments from rising interest rates. The committee also acknowledged the good sterling share class performance of the Total Return Bond Fund in comparison with other fixed income asset classes.
Mark Fulwood then updated members of the performance review of the portfolio, which although it had not met the average annual target return of 6.0%, gross of fees, for 2013, he felt would be achievable over the medium term. Members also acknowledged that the current portfolio had significantly outperformed the previous benchmark and an added value of an estimated £5m. Kevin Adams then concluded the presentation by providing members with an overview of the market outlook, suggesting that global growth would continue to improve, particularly in the USA and the UK. UK Gilt yield prices were also expected to normalise, whilst corporate bonds would continue to perform strongly all the while low interest rates remained.
During members’ discussion, a member noted that asset backed securities accounted for around only 12% of the portfolio and he queried the reasons for this. In respect of the More London investment, he enquired what steps would be taken to protect funds if the tenants moved out or were unable to keep up with payments. As interest rates were likely to rise in future, he asked if any modelling had been done as to the likely impact on corporate bonds and what was the proportion of bonds in sterling and how were currency risks managed. Another member sought the details of the relative size of investment holdings with governments in ... view the full minutes text for item 4. |
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Quarterly monitoring report on fund activity PDF 700 KB This report provides a summary of the Fund’s activity during the quarter ended 31 December 2013. It examines the actions taken, the economic and market background, and investment performance, as well as commenting on events in the quarter. Minutes: Anthony Dodridge introduced the report and confirmed that the total value of the Fund had increased by £14.1m in value to £562.5m in the quarter ending 31 December 2013. The Fund’s return for the quarter was 2.9% which was only a small margin away from the benchmark of 3.2%. The largest contributors to the positive return were publicly quoted UK and overseas developed market equities and encouragingly, after a number of years of underperformance, UK property. It was noted that private equity, infrastructure, European property and emerging market equities had a negative impact. Anthony Dodridge advised that as of 31 December 2013, the 12 month return was 11.6% as compared to the benchmark of 13% and for 3 years an annualised 5.6% compared to the long term investment return target of 6.5% per annum. Members noted that although at the time of the publication of the report, the Fund had reported an estimated drop in value of £8.5m for January 2014, the most recent indicators suggested that a strong performance in February 2014 had since reversed this loss.
Anthony Dodridge explained that the UK’s strong sterling performance against other currencies, in particular the US dollar and the Euro, had dampened investment performance in the Fund’s investment holdings in overseas currencies, such as private equity, infrastructure, emerging market equities and European property. Whilst the Fund had been one of the lower performing Local Government Pension Schemes (LGPS) for a number of years, Anthony Dodridge advised that almost 20% of the Fund’s assets were held in unquoted private equity and infrastructure investments that would continue to remain immature for now, although these should bear fruit in the long term. Furthermore, in some investment areas, the Brent Pension Fund compared well to other LGPS, such as fixed income where it had performed as the tenth highest percentile nationally. Members noted the asset allocation as of 31 December 2013 compared to the benchmark and investment returns in individual markets. Anthony Dodridge also welcomed the fact that outstanding contractual commitments on private equity and infrastructure had been almost halved since 31 March 2012.
Peter Davies (Independent Adviser to the Fund) then advised members that the last quarter of 2013 and for the whole year had been good for equities in Northern European countries and the USA, but much weaker in the emerging markets. UK inflation had continued to fall and the Consumer Price Index had fallen for the year to January 2014 to 1.9%, below the 2% target rate. There were encouraging forecasts for UK growth in 2014, with the growth rate significantly higher than previous forecasts. Turning to equities, Peter Davies advised that although there had been some optimism at the end of 2013, this had been disrupted by the fall of the Argentinian peso which had triggered weaknesses in several other currencies, including Brazil, Chile, South Africa and Turkey and investors remained cautious in respect of emerging markets. Members noted the year to date moves in equity markets for the UK, which had ... view the full minutes text for item 5. |
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Funding Strategy Statement - triennial update PDF 428 KB To comply with regulation 58 of the Local Government Pension Scheme Regulations 2013, the Brent Pension Fund must prepare, maintain and publish a written statement setting out its funding strategy. A formally approved Funding Strategy Statement is published in the Brent Pension Fund Annual Report. The Fund’s proposed FSS is attached at Appendix 1. Minutes: Peter Davies introduced the item and confirmed that every pension scheme was required to have a funding strategy statement. The funding strategy statement had been prepared by the Fund’s actuary, Hymans Robertson, and had been reviewed by Anthony Dodridge and Peter Davies prior to a consultation exercise with the Fund’s employers via e-mail and would take effect on 1 April 2014. Peter Davies drew members’ attention to the various approaches used by different employers and the stabilised details of the council pool and he confirmed that in the opinion of the Fund actuary, the current funding policy was consistent with the investment strategy of the Fund. In respect of the triennial funding evaluation on 31 March 2013 and setting contribution rates effective from 1 April 2014, members noted that the Fund’s actuary had assumed that future investment returns earned by the Fund over the long term would be 1.6% per annum greater than Gilt yields at the time of the valuation.
Anthony Dodridge added that all participating employers in the Fund had been consulted on the funding strategy statement and none had raised any concerns.
During members’ discussion, it was queried why representatives of the Fund’s actuary were not present at the meeting to introduce the report and respond to the committee’s questions.
In reply, Anthony Dodridge advised that the costs of inviting actuary representatives was high. Mick Bowden added that it was the committee that had ownership of the report.
RESOLVED:-
that the updated Funding Strategy Statement be approved. |
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The report is attached. Additional documents: Minutes: Anthony Dodridge introduced the report and began by referring to the committee’s support to collaborating with other London pension funds through a collective investment vehicle (CIV) at its meeting on 19 November 2013. The purpose was to make use of the London borough partners’ combined strength and size to appoint the higher achieving fund managers, whilst also driving down their fees. Members noted that a total of £625K had been contributed by 25 of the London boroughs involved, with each contributing £25K.
During members’ discussion, clarification was sought as to whether the £25K contribution was a one-off cost and what other advantages did a CIV offer in view that the committee was satisfied with its asset allocation. In respect of paragraph 1.9 c) in the report, a member sought clarification as to whether it was appropriate that the Chair of the Brent Pension Fund Sub-Committee be delegated the authority to act for the council in exercising its rights as a shareholder of the Authorised Contractual Scheme through a Pensions Joint CIV Committee or whether this should be officer delegated. It was also queried whether there would be an officer led group that supported the Pensions Joint CIV Committee and what would be the staff implications for participating in the CIV.
In response to the queries raised, Anthony Dodridge confirmed that the £25K contribution was a one-off cost that would be used to help set the CIV up, although there would also be ongoing costs for participation in the CIV. The Pensions Joint CIV Committee would receive officer support and guidance and there was the possibility of secondments being put in place to help the delivery of the CIV. Anthony Dodridge advised that the purpose of the CIV would be to access assets in the most efficient way possible and to help identify and appoint the best performing managers.
Mick Bowden added that staff implications would be dependent on what level of participation in the CIV the committee decided and how the CIV progressed. In respect of membership of the Pensions Joint CIV Committee, he advised that this was a councillor body and he agreed to provide members with clarification concerning its role in exercising its rights as a shareholder of the Authorised Contractual Scheme.
RESOLVED:-
that the recommendations as outlined in paragraph 1.9 of the report be endorsed for approval at the Full Council meeting on 3 March 2014, subject to clarification being provided in respect of 1.9 c) in the report concerning the Pensions Joint CIV Committee and its role in exercising its rights as a shareholder of the Authorised Contractual Scheme. |
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Date of next meeting The next meeting of the Brent Pension Fund Sub-Committee will be confirmed at the Annual Council meeting on 4 June 2014. Minutes: It was noted that the next meeting of the Brent Pension Fund Sub-Committee would be confirmed at the Annual Council meeting on 4 June 2014. |
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Any other urgent business Notice of items to be raised under this heading must be given in writing to the Democratic Services Manager or his representative before the meeting in accordance with Standing Order 64. Minutes: Record of thanks
On behalf of the committee, the Chair placed on record his thanks to Councillor Bacchus, Councillor Hashmi and Anthony Dodridge for the service they had provided to the Brent Pension Fund Sub-Committee as this was their last meeting of this committee. |
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Exclusion of press and public Minutes: RESOLVED:
That the press and public be excluded from the remainder of the meeting as the reports to be considered contained the following category of exempt as specified in Schedule 12A of the Local Government Access to Information Act 1972, namely:
Information relating to the financial or business affairs of particular persons (including the Authority holding that information). |
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Review of Asset Allocation This report is not for publication as it contains exempt information as specified in Schedule 12A of the Local Government Act 1972, namely information relating to the financial or business affairs of particular persons (including the authority holding that information). Minutes: Members had before them a report on the review of the Fund’s asset allocation. During members’ discussion, the information contained in the report was welcomed and it was commented that it would be useful to include such details, including providing a historical context, in future reports assessing asset allocation. It was suggested that it was not just the type of assets that the Fund had that determined performance, but how Fund managers used these. A member suggested that the report did not necessarily provide evidence that there was any correlation between the performance of local authorities funds and the number of external fund managers they employed.
In reply, Peter Davies concurred that the choice of fund manager was a contributing factor, along with a number of others, as to how funds performed and sometimes the fund manager’s role could impact significantly.
Anthony Dodridge added that the negative impact the fund managers had on Brent’s relatively poor performance had been consistently reduced from what it had been in prior years. He acknowledged the point raised by the committee in relation to correlation between fund managers and performance, and assured members that the Brent Pension Fund’s total number of fund managers was comparable to most of the higher performing local authorities.
RESOLVED:-
that the Brent Pension Fund’s past investment performance relative to some of the top performing LGPS funds and recent action which aims to improve the Fund’s future performance be noted. |
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Actuarial Contract - Annual Review This report is not for publication as it contains exempt information as specified in Schedule 12A of the Local Government Act 1972, namely information relating to the financial or business affairs of particular persons (including the authority holding that information). Minutes: The committee had before them the actuarial contract annual review report. A member queried whether reports that were for noting needed to be put before the committee. Another member commented that such reports were useful in informing the committee and members also had the opportunity to raise any issues or questions with officers about the report prior to the meeting.
Anthony Dodridge advised that reports that addressed important issues pertaining to the Fund should be presented to the committee, even when no decision was required.
RESOLVED:-
that the actuarial contract- annual review report be noted. |