Agenda item

This report provides a summary of the Fund’s activity during the quarter ended 31 March 2017. It examines the economic and market background, and investment performance, as well as commenting on events in the quarter.

Members considered a report that provided a summary of the Fund’s activity during the quarter ended 31 March 2017 and examined the economic and market background, and investment performance, as well as commenting on events in the quarter. Ravinder Jassar (Head of Finance) introduced the report and answered members’ questions. He informed members that the Fund increased in value by 3.5% from £775.4m to £802.7m during the quarter ending 31 March 2017 and in the calendar year of 2016/17, the value of the Fund rose by 17.3%.

In reference to the asset allocation table within the report, the Head of Finance drew members’ attention to the overweight in equities and cash.  He clarified that the equity overweight was as a direct result of investment appreciation and the Fund’s cash position was for investment in other investment opportunities.  He explained that in Q1 £50m was invested into the London CIV Ruffer Fund in March 2017 as per the Investment strategy agreed by the sub-committee in February 2017.  The remaining balance was principally held for further calls on capital commitments in private equity and infrastructure as well as to re-allocate to other investments.  He continued that some of that cash would also be required to fund transfer values in relation to the College of North West London as it had been agreed by their governing body to merge with the City of Westminster College and transfer their element of the Pension Fund to the London Pension Fund Authority (PLFA).  This was currently planned for August 2017.

The Head of Finance updated members on the Fund’s property portfolio.  He clarified that UK property investments had been completely sold as planned, leaving only European property investments of £3.6m and subject to market conditions, the latter was planned to run down in 2017/18.  Members were appraised about the following other notable distributions and capital proceeds that took place in Q1 2017:

a)         Capital Dynamic private equity distributions in the quarter of £6.0m

b)         £2.2m sales proceeds from the Aviva UK property fund

Peter Davies (Independent Adviser) presented his report to the Sub-Committee.  The report focussed on the economy, markets both equities and bonds, currencies, commodities and properties.  Members heard that Global Equities had registered solid gains for the 6^th successive quarter, giving a cumulative rise of 42% in the All-World Index (in £) in the 18 months to end-March. The rise which assisted the main UK and US market indices to recently attain all-time highs was boosted by low interest rates, and sizeable quantitative easing programmes in Europe and Japan. He drew members’ attention to various uncertainties arising from the recent UK Parliamentary Elections and the Brexit negotiations, the US Presidential Election and the French Elections and their impact on bond yields. 

He continued that with further increases in US short-term interest rates predicted for 2017 and 2018, yields on medium-dated US government bonds seemed unlikely to fall from their present levels. Any signs of a slowdown in the pace of quantitative easing in Europe or Japan could also have an adverse effect those bond markets.

Members raised questions about the rising inflation and/or the recent fines imposed on Barclays Bank Plc for manipulating the LIBOR would have an impact on the Fund’s strategy. Peter Davies responded that the rise in inflation was a mere fluctuation and thus not significant as to affect the assumptions made for the Fund’s investment strategy.  Similarly, the fines imposed on Barclays Bank PLC was a local problem which again would not impact on the Fund.

RESOLVED:-

That the report on quarterly monitoring on the Fund’s activity for the period ending March 2017 be noted.