Agenda item
Strategic asset allocation
- Meeting of Brent Pension Fund Sub-Committee, Tuesday 30 September 2014 6.30 pm (Item 13.)
- View the reasons why item 13. is restricted
Minutes:
Julian Pendock presented the report and stated that investments were increasingly moving from a regional to a global level and it was also important to consider where a company was selling its assets from. There was a trend towards multi-assets as these provided more tactical flexibility and freedom for the fund manager and avoid the situation of being forced to buy assets. Active equities involving investing in companies was also desirable. Julian Pendock advised members that the Fund was moving towards using more active fund managers as opposed to passive ones. A good active fund manager would be able to achieve good returns at low cost. However, one of the reasons for the Fund’s relatively low performance compared to other LGPS was attributable to disappointing performances from some of the active fund managers and in particular there was one poorly performing fund manager who also had a large weighting of investments that was adversely affecting performance. As a result, Julian Pendock advised that it was timely to undertake a review of the strategic asset allocation.
During members’ discussion, it was commented that flexibility provided by multi-assets and timing of investments were both desirable. It was also queried how assets would be reallocated in the event that a fund manager was replaced by another. A member commented that although he agreed with the broad direction the Fund was taking, he still felt that it would be useful to undertake comparisons and weightings of investments with other LGPS. He also asked whether the views of other local authorities could be obtained with regard to the poorest performing fund manager in the Fund. It was also remarked that from an employer’s point of view concerning their pension contributions, there needed to be reassurance that there had been an element of ill fortune and technical naivety, rather than a fundamental flaw with the Fund, that accounted for past underperformance. Another member stated that the employer contribution rates for the Fund was fairly average compared to other London boroughs. He also sought observations regarding the outcome of the meeting between the council and the lowest performing fund manager. A member requested that in future, where reports stated that there were no legal implications, they should include an explanation as to why.
In reply to the issues raised, Julian Pendock stated that an active fund manager was good from a governance perspective. In terms of measures to improve the Fund’s performance, there were a number of things he thought could be done better. He confirmed that he could include the views of other local authorities who also used the same lowest performing manager for this Fund. Julian Pendock added that setting sensible contribution rates was the best way of recovering debt.
Peter Davies referred to the meeting with the poorest performing fund manager and advised that their private equity investments were based on a complicated structure and in his view the figures that they were providing were not robust. He also felt that their accountability for performance was not presently up to the standards required.
Mick Bowden confirmed that he would circulate to members the strategic asset review report from the previous meeting on 25 February 2014 that compared the Fund’s performance and asset allocation with some other local authorities. He advised that the percentage of contribution rates could be misleading and the relative size of the deficit needed to be taken into account, adding that the Fund was not relying on markets to wipe the deficit out.
The Chair advised that the council and Peter Davies would continue to meet with the Fund’s poorest performing fund manager and then provide an update on this at the next meeting. Members also agreed to the Chair’s suggestion that a report be produced at the next meeting comparing multi-asset funds, passive and active fund managers, the views of other local authorities who used the Fund’s lowest performing fund manager, a synopsis of the structure of other local authorities’ funds and their investments and the implications in the event of replacing a fund manager.
RESOLVED:
(i) that an update on the outcome of meetings with the Fund’s lowest performing Fund manager be provided at the next meeting; and
(ii) that a report including comparisons of multi-asset funds, passive and active fund managers, the views of other local authorities who used the Fund’s lowest performing fund manager, a synopsis of the structure of other local authorities’ funds and their investments and the implications in the event of replacing a fund manager be provided at the next meeting.