Joint Pensions Committee - Tuesday 5 December 2023, 7:15pm - Wandsworth Council Webcasting

Joint Pensions Committee
Tuesday, 5th December 2023 at 7:15pm 

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good evening and welcome to everybody who has some logged into this remotely, my name is Councillor Marshall and I am Chair of the Joint Pensions Committee, I'm not going to call out the names of the committee if you could just switch on your microphones to confirm your attendance in the usual way. Councillor Craigie,
good evening.
Councillor Caddy,
Councillor Cook, Lake.
Councillor Gasser,
good evening.
Councillor Dick at him,
minute.
Councillor Pridham.
and Councillor Sarah good evening, thank you very much, we've received apologies from Councillor Ireland, the following officers are present, Mr jealousy on my left is Baxter, sitting in the body of the Chamber, Mr. Doyle.
I was online and big button and Mr. Kershaw on my right, we also have an attendance, Mr English, at the end of the row, who was just it was our pension fund adviser from Mercer.
agenda item 1 minutes from the 7th of September, I'd just like to thank Councillor Craig for cheering in my absence, but can I ask the committee to agree that the minutes of the Joint Pensions Committee meeting held on the 7th September as a correct record,
agreed, thank you very much.
ITEM 2 disclosable pecuniary interests do Members have any dislike?
pecuniary a monetary interests and any other relevant personal interests in any of the matters to be considered at the meeting.
now on undeclared, so agenda item 3 governance, compliance statement I would like to ask the Assistant Director of resources to introduce the item.
thank you Chair, hopefully this particular paper is relatively.
self-explanatory. The actual compliance governance statement is a requirement under the legislation, so each admission authority is required to prepare, publish and maintain a governance policy and caprice statement, which is here before you whenever there are any main changes to it, we have to review it or, alternatively, you do it every few years, so there's been a couple of minor changes, but they are, they do actually impact on what it is, so the only two real changes are that we reduced the number of people on the local pensions board from eight to six, and there is the change in name of
the relevant body or it could be supporting move from the acronym them which see all G to D luck. So they're the only real two changes, but whenever we do that we have to get it go through an approval. It's already gone to a local pensions board, they've agreed it, and it's here now for formula adoption said I already proposed to go into any particular detail, but Mr Da should hope to be annoying if there is any particular questions you have on the actual statement itself.
Councillor Kelly,
it was just equipment on page 17, there are two areas where I partially compliant, but do I take it that the way we structure it, it doesn't matter that we're partially compliant, because we cover it in substance anyway?
let me just fine the various split.
yes, I mean, I mean quite often with some of these things is whenever you're looking at it.
collectively, if you think about the whole structure in our GPs, with 80 odd funds, they are going to be different bodies that would be set up, we do actually have, it says, representatives from employers and as well as individuals, one of the changes that we made actually was to reduce the influence that the main body has the Minister and authority because where it used to have two of eight members, one for Richmond and one for Wandsworth now just as one for the joint administration so they're one of the the areas that we have, but in the main what is partially complied on this it's not something of a significant concern
very good thank you will, if there are no further questions, I think that then we can move on, we are recommended to note this report and approve the proposed governance compliance statement for the Wandsworth pension fund in the attached appendix.
do I take it that that's approved, thank you very much,
agenda Item 4, training, update and policy.
a case for, I know, we've had a few add, new members that have joined us fairly recently, so I will get Mam just for their benefit, recap the process that we have and it sort of touched upon in an in or another paper later on and in response to the consultation, so training itself, as the has two different elements really were between that of the local pension board and that of the the Committee. Quite strangely, the way that the regulations were set up is it is a statutory requirement for the local pension board to undertake certain training and formalities and be able to evidence and demonstrate that they fully comply
currently there is no such statutory requirement per se, however there is a requirement under the acronym MiFID to please forgive me, I can't remember exactly what it means, but for us to be able to elect to invest in the assets that we invest in, we need to as a collective be able to demonstrate that we have the relevant expertise in order to do that, otherwise you can't invest in any of the products that we currently invested in and the way that we do that is by ensuring that all of the individuals that sit on this committee have the required knowledge and expertise that's format format.
part of the training policy which is here in the appendix and as part of that, there are certain requirements that he's mandated for anyone that is on this committee to undertake and partly we for. We do that through the online tool that enables ourselves to pick up and put down, as you are able to other elements are dealt with. As you we had just prior to this committee, we have briefing sessions on any key topical items and they will also obviously be thematic areas, one of which we have, for example, was when we would got the the scheme's actuary to come in and give training on the process around valuations.
we've got another training session later on today,
where we got a new asset class or change in potentially the way that we invested in asset classes delivered and you'll have training on bonds and the impact of duration later today, so that sets the tone and sets the the area, clearly we as officers don't know in detail your own knowledge experience and where you need assistance, so that's why you've got the skills and knowledge framework the self-assessment questionnaire.
which we need you to complete and fill out and return to Carl Baxter, so from that we can obviously then potentially plan and outline any common need we will have in the sessions here, or if there's any one to one specific training that we need to provide and support you with we can assess them and provide it, we know that most of you have.
it started all been able to complete the required manager training, but, as it says in the report that you do need to fully complete body end of this financial year, the 31 st of March.
as I said before, in the terms of reference, it is a requirement for you to be on the committee to complete that training, so we were hoping that by setting at that time, the gives you sufficient time in order to complete it, similarly to do your self assessments and for us to be able to to know how we can go about doing this particular training going forward and any appendix there were a couple of areas where we think we were scheduling in, but we hope for that to continually evolve and change based on your individual needs. So hopefully that sets the scene and either myself will Ms Baxter will be able to answer any questions that you may have on the policy or anything that I've said.
thank you, are there any questions, Councillor Sara, thank you, yeah, I had one very general question about what it says on page 32.
and there is a section on there about please state the average number of hours training committee members have attended over the last 12 months, so I went to the the today London, the CIF conference does that count as?
I mean, yes, it would I mean, if anybody ever obtains any conferences, if I can e-mail Ms Baxter, then we can keep a record of it, because this is just what we had to date for this, as part of the form that we do for acting up to the London SIF for us to be at demonstrate that we are,
the prerequisite to be treated as a professional client.
so when you are doing your activities, some of the times you may have other officers with you who may be able to note it, but if you don't see there or whether we will be, we won't be sited, so yes, please, if any of you that do undertake any training in your own time please let mismatches and also being keep a record of it.
kind of Councillor Gasser.
it's just on that same page, it's just trying to understand you offered 76.5 hours, you delivered 64 hours, but the members did an average of think it was seven hours that to me that doesn't all quite adapt, but maybe it does Kate Young literally you'll be 64 divided buy-in.
9 poverty.
okay, 0, I sit round because I think it's right that you officer, not not all the hours, are taken out for want to do anything.
then again, so.
could we please?
note the progress made by councillors in progressing the comprehensive online training plan, approves the updated training plan and approves the next steps. Thank you very much agenda item 5,
as our quarterly investment report for 2023 to 24.
OK, so again, this is a paper that you see quarterly, it outlines the performance, both on a a quarter annual and 3 years of the individual funds that we have.
what was showing overall, isn't I presume, in general, quarterly performances are up and down and we shouldn't really track on that sort of basis, its moment would be 1 and 3 years and potentially longer than that.
part of the challenges that we always faces and we've alluded to appalling we've talked about the autumn statement about moving more into the poem we as a committee are only able and going forward realistically to set the strategy, the performance of those underlying managers within that strategy will be determined by the London see iv your note that some of the equity
mandates continue to underperform both in real terms and in relative terms, when we talk about relative, what we mean is the WRU against the benchmark, for which we are set in the same. So there can be occasions where a fund is in negative performance when actually they're still doing quite well because the peer group that there'd been assessed against is doing worse than them. It just so happens, unfortunately, at this present moment in time, that there are some funds that we are invested in through SIF, whereby both aerial performance and their relative performance
is even
worse compared to their peer group that sits within the our global equity mandates. We have raised these concerns directly with London see iv they will be here later today on a different topic. So if there was anything you particularly wanted to ask of them, we could enjoy them in before we talked to them about the main reason why they're here today about the buy and hold sterling credit, but there will be some said that there will be the opportunity to talk to them specifically on that but, as you can see on the individual managers performances that they are, unfortunately, below
benchmark, if this were to continue, one of the things which we might wish to consider would be our faith in their ability to do active management and we could still maintain our exposure to equity by going through to a passive.
approaching in that way we would just be tracking the index, it's a low cost approach doing it, but historically we've had faith in the active management outperforms and, generally speaking, if it outperforms it means that the contributions that the employer has to make are lower.
we've had faith in doing that.
but, as I mentioned, we know our ability to pick and choose managers is no longer there, so that is something that we will need to.
keep track on through this paper and when we come to reviewing that, probably at the next valuation cycle, we will look to consider that unless you wanted that issue to be reviewed before, so I don't really propose to say too much more or less there's any particular questions or if there's any thematic issues hopefully you can sell for Mr initial be able to answer them.
Councillor Kelly and then Councillor Sarah, this probably sort of relates to what we're gonna talk about later, but I was just looking at the performance of the bond managers and I think one of the comments is that Allianz and Janice Henderson have both been slightly below the benchmark, but obviously I guess that's looking at very, very recent performance and over three years they're sort of not doing too badly, but those kind of assets presumably would be looking at a much much longer time span in terms of holding them. So I wondered whether
for those particular managers, we had a sort of longer view of of how they've performed, because I guess the three year.
it's a very short short timescale to be looking at in the context of those kind of investment.
I mean in general, when you're looking at a relative performance, that's probably why we looked particularly at that because that will be against its relevant peer group, so I'm trying to think so if you're looking.
certainly over the three years, Janice Henderson.
these
slightly underperform at 60 basis points.
and then, if you scroll down, probably too facile, Darling says.
alliance is actually outperforming at the moment over a three-year period again very small.
yeah yeah, I just wonder whether can we not look at relative to benchmark over a longer period or do not have that data, and we don't have the data right now and everything else swellings before we have how to fund longer, but it's generally speaking we've only done it for three years originally as part of the reason for only doing that was the amalgamation of the funds, so it was done on that sort of basis, I mean you could go to five years for some assets but as we move away
we turn over different managers, then it is more of a challenge, but yes, they could potentially do it, but how relevant would it be over a five-year period, some of them do since inception so?
each year its pros and cons of I'm honest with you, so I mean for some assets we will hold him for that long and we could we could bring it here with if we're able to get the information from Northern Trust I guess I guess my point is it's difficult to see whether they've been outperforming the benchmark over a long, longer period of time or consistently and if we're sort of in it.
making any kind of judgment as to whether we should move any of that money.
it would be interesting to have that data thing to bear in mind is which that's talking about managers, and we are no longer going to be in a position to hire or fire managers. These assets are ones that we should, in theory, be moving across by the 31st of March 2025. These are ones that are going to be harder for us to be able to do to explain on the value for money purpose, that it's reasonable to keep them outside, of pooling a key, more fundamental issue which we'll talk about as part of the training going forward, is the style balance of this manage these managers versus the options that you can have in the safe this, the the managers that you've got here, give
the ability to have a much wider universe of an duration than the two options that you have in the London SIF which is either a short or a long duration, these don't have the constraints of that and so we could sort of match of some of it by blending it and that's that's talk for later on and in the closed session when we can go into a lot more granular detail on the training about the differentials between the two types of options, the the the short and long versus this because that is probably more where you are looking at strategy rather than a manager selection and strategy remains with this committee.
there was anything she wanted to win such an.
my turn, yeah, thank you.
if we just prefer to page 44 to start with
when we look at the the asset class performance of the the global equities fund, now I was just interested in Y views about the the Baillie Gifford fund and the sustainable equity, the ABI SEFUND, the festival they're very similar holdings.
sorry or that the proportions are ones about 12%, the other once-daily, 9%, but if we look at page number 48, the top of page 48 and we look at the returns from those funds, the Baillie Gifford funds return has been about 6%, but that's lower compared to its benchmarks. It's relative to benchmark it's achieved about half of what the benchmark is, which is should be plus 11%, but if we look at the ABI SEFUND, that's 1 minus 1 point for compared to a benchmark of 11.5 now I make that that's about a 10th of what the benchmark.
return or to have been am I reading that correctly and if so?
it's you know, do we have any any kind of background to that I mean it's worse than that I mean, because obviously the you know that the benchmark for ABC is a positive return and they've got a negative return, so I mean the actual differential is 12.9% in in relative terms,
part of the challenge, and I think when ABC were here, I was at the last committee, the one before they are a more of a highly concentrated portfolio, so Baillie Gifford is broadly will have about a hundred stops, I think, but I think.
the ABC or is 30 ish around that sort of number, so stock selection can have significant impact, and I think that was what they were saying when they came, I think they were, there were a couple of stops that had a significant impact on their approach, but that's why I say you know we do our ability to manage them and keep them on watch is limited because it's not we don't have the discretion to hire and fire
our approaches is to challenge the London see iv
on on what their approaches, and that's why I'm saying in reality the only options that we would have if we didn't have the the long term faith in doing that, but we still wanted to be invested in equity, we could potentially go and do it on our own, but that really is not in the spirit or even the spirit but in the letter of the the the new way forward with the regulations I don't think we could be.
only sensible to go and sacked lies in gunpoint, our own general equity type manager, if we didn't want to keep these, but we wanted to be vested in it in equity there are some other style options that are in the
within the Cif platform, or there is the passive approach, don't know if there's anything extra for me.
yeah, I mean, did it just to admin style is?
an important factor in.
there is also an argument for pushing the pool to have options that enable you to blend and appropriate.
portfolio of global equities, and I think that's been one of the issues that you've got some.
there's, but we're sorry the SIF as a whole had some quite big star biases, particularly the barriers to growth and what kind of an anti value bias so that pretty much.
most of their equity funds underperformed all at the same time, I know that's something they're looking at and they are looking to add a value manager about anything that's that's hasn't been finalised yet has it?
on the question, I think that this raises for me is coming back to this question of style and the difference between active management and passive management, obviously active management, where you're paying a fund manager to make some highly skilled.
assessments of the market and choose particular stocks versus passive management, where you're essentially just paying a computer to invest in something that mirrors the market, and the advantage of that latter approach has often it is much cheaper and that you just simply follow the market and therefore your these variances, these relative percent that we are seeing are are close to 0. That would be the ideal, so I just think you'd be helpful if you could just explain what are what our options are on that, particularly in this world in which we're being our options are being constrained to the serve
what options do we have to pursue a passive management strategy, and what do you, what do you think we should be doing, what sounds do you think we should be taking versus?
in terms of how much active and how much passive we should be taking, and I think this is true to say this is largely concerning with the nearly 60% of our portfolio, that is inequities rather than the than the other elements correct.
yeah, I mean our benchmarks 55%, so that's what the targeted asset allocation towards equity investment is, I think, if you go to any conference or you go to listen to any sort of a major presentation from either fund managers or consultants.
I think the majority Mercer will correct me if if, if I'm from wrong, I think the Mercer's view is that active management is.
sensible and it is a good way to get outperformance, and hence that's what it's all all aimed at doing, but in order to do that in, you would normally have to be able to do you appropriate due diligence on the managers that you appoint,
we as a committee no longer have that ability to do that.
that is undertaken by the London C IV, and therefore the only thing we can do is challenge them and listened to the queries and the answers that they give to see, do we have confidence that ultimately?
this is a short term approach, now our strategy should be based around three months or even 12 months, it should be much longer than that, and there will always be periods of even really good managers that we have a lot of faith in that we'll have our ups and downs.
there's one that the this particular committee has been invested in for numerous times, which sits within the CIF that's currently doing OK, but it had a period of time so long view has been up and down, there have been periods where their performance has been really poor and really low, but you you wouldn't necessarily want to sell out one.
of them at that time, if you have faith, there is an argument that you would dive in and put more in when their approaches cheap, those assets technically are cheap, but when doing that normally you're accountable, you're responsible, you've got that ability to pick and choose that is limited now, so you are, it's that's why we need to make sure that we keep on top. We ask appropriate questions from the London see iv
and if you don't have faith in that, but we have faith that equity is the right way forward and will move to when we're doing that when we've looked at the model line and we're proven both the actuary and from Massa, you'll see that they know that they're aim to do is to hit that long term. Cool return are having inappropriate, diversified portfolio boss. We are maturing fund, we have a lot of new entrants to the scheme every year that are occurring new liabilities. The only way really to get that long-term sustainable return to minimise the contributions that we have to make is by investing in assets that we're going to appreciate above inflation and one of the good investment ways to do that is through equity, so passive is a cheap way of doing it.
but whilst it's cheap, you won't get any outperformance.
Councillor Crookdake thanks an interesting that you are talking about investing to outperform inflation.
with that in mind, I was just looking at the target per annum column, I mean they, they seem very low.
and I just wondered when we might debate whether they should be higher and therefore, whether that would then lead us to think more about and how we allocate.
in terms of the types of assets.
OK, so the target is against their benchmark, so when it says plus 2, it will be against their relative benchmarks, so for something like equity it will be there, they are some nuances depending upon what their style is, but in general you'd be against the global market, so I'm SCI so that's quite a very tough target to achieve 2% above the average passive mandate, so if you think in reality if they were doing their job,
appropriately and meeting their target, if I don't know the exact numbers, so I will use notional figures here if you've got a passive mandate where you're paying 0.1% for them to deliver on, but you're able to get a neutral market.
what you're hoping is that someone like Baillie Gifford would achieve where we're asking them to achieve 2% net fees above that return, so if there are any charges, they are charging 60 basis points in reality and they're hitting their target you'll get in 1.5% extra return net of fees so that's quite stringent target plus 2.
as there are no more questions than we are recommended to note the investment performance of the pension fund and note that the global focus fund is above 15% of the fund and cash is above the higher benchmark threshold, but I think there has been quite clearly explained in the report that we should just hang on to that cash because we're gonna be spending it pretty soon.
and decide which, if any, managers, we wish to attend the next meeting of the Committee, which I don't think we have covered yet.
any requests from Members or any thoughts from officers.
am I mean we've seen several of them recently, including
lamping over the two of just mentioned and highlighted as as not necessarily performing well.
if, if Members on don't have any particular issues or concerns one that may be worth noting and depending upon what happens over the next sort of period.
you'll notice that in the general matters paper, we make reference to the navy and some of the changes, and I think we highlighted that at the last committee it may well be that you just delegate to officers to who to bring with or depending upon what is happening with Navin you may wish to have them or hear in person clearly if there isn't much extra progress to to stay we will come up and we will look to find an alternative for you.
who seems like a very sensible proposal or just wait on events over the next term until our next meeting, and to ask the officers to choose somebody appropriate, thank you, so I do, I take it that those all points are all agreed, thank you very much.
the general general matters then.
item number 6, OK, so I I think this is my sort of catch-all paper that you normally get, so we do things no mean in bitesize, so if I do it section by section and then take any any questions or queries, so the first one we touched on briefly prior to Committee in part of the the training session is the autumn statement and whilst substantially as the Autumn Statement linked to that is, it's the response to the government's consultation which was discussed
as part of that autumn statement.
I should say many really just a slight correction in the first bullet point where notes refer to all liquid assets should be transferred, as you heard earlier, is actually all assets that should be transferred, such is not just liquid.
now one thing if we if we don't it's not the end of the road and we will need to put out a rationale for why we're not going to to do that and subject to what we do later on.
today.
when we hear about the buy and hold sterling sort of a credit mandate, the group that we were looking to to amalgamate and and put it into the London C IV, if we were to do that, in reality, most of the funds that we would have remaining outside of,
the safe are those more illiquid funds, those longstanding whether or not some of them will even be closed funds or our ability to liquidate and move will be highly limited and or they will have huge transaction costs, things like property to actually sell out and move across, so I think that will be relatively easy for us to be able to explain similarly our passive mandate it's a queasy pooled product because it's part of LGIM which is overseen by
the poll, even though it is not directly managed by the pope.
and we are also has an LGPS share class, so I think that would be relatively easy for us to be able to explain the only one really where, because it's it's all assets, not liquid is.
our remaining investment in multiethnic credit that sits outside that actually has a 90 day up to 90 days in order to liquidate, so you could bring that in.
now whether that's the one grey area?
it would be a we added evidence and demonstrate its value for money, certainly at the moment would articulate that it does in the sense of the aggregated return that it would deliver in relation to.
having a much more diversified portfolio and being less volatile, the the two sort of multiethnic credit, like funds that there are in the SIF at the moment is what they call multi-ethnic credit, where it actually incorporates some investment grade bonds in their blend, which I don't know whether the Minister will have any comment particularly on some of the yes G elements.
on on that approach, but also for us on the Maldives at credit, which is now called alternative credit which is manned which is maintained within the Zippo CQS, that's more of a European central focus, so if we were to move into that area which is what we believe is our definition of multiethnic credit, it'd be highly concentrated, we would have all of our money invested in.
the European geographical area. So we'd probably advocate to keep it outside class and value for money in a more broader term, saying that at the moment we want that diversification to make sure that we're actually getting that all round coverage, so I don't know whether there's anything particular on platform item. Sorry, yeah, I'm just going to add on the on the the MAC funds, yet it would be important to consider the climate metrics and I know that I did have a chat with LCC of a couple of weeks ago that we, I did, a review of the MAC fund recently for another client and its it showed that the the implied temperature rise of the MAC mandate was increasing.
particularly the one which includes pinko, which I know isn't the one that you have, but one that also seek us have one of their stocks as well, so they are there, I certainly at the moment wouldn't advocate making any Niger reactions on the on the MAC allegations.
so the other areas in the statement stroke, a response to the consultation.
I think we've touched upon earlier, namely that there will be firmer guidance on the training policies for committees and how we need to report on that they will be further guidance on the sort of information that we would be reporting in our funds annual report.
the main aim of that and hopefully is to try to ensure there is appropriate consistencies, so there can be better compare and contrast between how funds operate not just on an investment purpose, but on administrative purposes there is the plan to invest in up to 5% in local assets as we highlighted earlier, I think we believe that the
he is relatively broad enough for us to to utilise the assets that we already have invested that would meet those requirements, we've got allocations to commercial property which create jobs, which also helpful the living up approach, similarly on private equity we've got as but again previously mentioned the infrastructure allocations so we're on that sort of areas that's why we believe that in the main that we would not have to do anything other than explain,
those are nuanced areas which we think we can articulate.
and then the other point is setting objectives for investment consultants and we've already been doing that for for a while, so with that in mind, before moving on to the next thing, is there any particular questions relating to those areas Councillor Craig, you and Councillor Kelly, so my understanding of one of the principles that the Government's coming through is is the assumption that the the larger pot of money invested in a similar asset the lower the charges are,
my impression of that is it's quite poorly evidenced at the level we're working at and do we have any figures, no rush, but I'd be interested, whatever our charges on our multi-ethnic could at now basis points if it was pulled and the mandate was moved from 150 million to 1.5 billion what is the actual potential cost saving because my impression is it?
not worth the hassle and the transaction costs we're talking like five or 10 basis points, we already get a good price, the price would move slightly better, or even not at all, am I right, it will be small basis points, but when you talk in 2.8 billion pounds they they can be relatively large.
overall, the challenge we always faced with these is that unless you kind of like for like movement from A to B of exactly the same manager, it is very difficult to actually give a genuine, honest answering in savings, so the SIF do provide savings assumptions that they've delivered on they are positive rather than the negative but it is notional, especially when you've got we didn't have RBC as an investor.
we can't guarantee that the rate that they the CIF have achieved is better than what we could have achieved on our own, I think most people would would come to the conclusion that that
size does matter, and if you've got those areas where you've got significant additional quantum that an individual is going to be more attractive, to have your business, so we'll give you a better deal.
so when you look at it, the metrics from what are produced by the London CR-V, it does show a positive benefit on fees, but fees are only one thing, it should be returned net of fees that they have achieved, and that's always going to be a challenge the government have said that they are not going to allow us to invest in other polls unless it's done through your own pool that was part of the response to the consultation, so if there is an attractive,
mandate that was being run by.
borders, the coast or central pool or any any other sort of areas which we may wish to invest in, we're not gonna be able to do, and that's really the disappointing.
things from the from the state and is that we are ring-fenced to our own people, and the only time you can do it is to layer up fees, which is against the point by getting haven't you have your pool invested in another pool, which therefore means there won't be any savings, so it's a challenge, and that's why, for where we have gone and done, things such as the hour when our infrastructure managers like JP Morgan,
they do a.
and LGPS share class fee anyway, so could we really get core infrastructure investment set inside the safe, with having their fee on top of the other fee much cheaper, probably not, and that's why I would be arguing pretend support this committee's approval that we keep. We remain that at, whilst it's delivering and meets our need that we wouldn't be looking to try and pay huge fees to get out of it and then go and invest in a new one would be the compliant explain
let the government tell us what we're doing is inappropriate and isn't delivering value for money.
I think my clients really along the same line actually and because I was just going to say that, obviously, given that I presume there'll be a significant transfer costs associated with any movement, it sort of counterintuitive to expect that we should be giving them a rationale for why we're not moving it rather than,
having to find a rationale to me that, given the the transfer costs involved in the fact that it's not very clear that actually the rates that were going to be getting all the fees are going to be any better, so I appreciate what they're trying to do, but I just find it very counterintuitive given that our main aim as the Pensions Committee is to take care of the assets that we've got under management and you know we're potentially being asked to make a decision that's irrational.
100% agree, that's what we said in our consultation, that's what the majority of people said in their consultation, the government decided that they wish to pursue and believe that by having a pooled assets will deliver long term returns better than the way that we've been doing it for many years.
I totally accept that Eno and I might get where we are on that, but it does strike a very discordant note, given what are kind of brazen detritus.
what are we supposed to put as a priority, our priority should be to maximise the assets of the pension scheme in an inappropriate way.
and that's the explained pot, so what was what we can do, it is with willing to articulate that we're not moving.
investment into the safe and articulate why so that that's the approach? So I'm not one for one minute advocating, like even today, that we weep that we say we definitely aren't going to move the the money that we have in bonds now into the safe. The CIF needs to be able to convince yourselves that this is an appropriate asset for us to be invested in. If they can great brilliant, will move across. We will fully comply. If we're not convinced, then we need to articulate why it's not just I don't like it, we actually have to have a genuine good reason not to so, and we've got that option and that, and that will be it if we're sensible, we're rational about our approach, we can articulate why we're not we're explaining and therefore, in my view, we should be compliant because it is comply or explain, so we will do it's not you'll have to comply. It's the orbit, and we'll explain it, but then it will be somebody else's
decision as to whether or not they agree and they can then direct if they don't think that we've justified well enough.
I just wonder if I could clarify, just going back slightly bottom of page 50, funds will be expected to have a plan to invest up to 5% in local assets, just one of you could clarify for us.
is it up to 5%, is there a floor on this, or is it just saying you can't invest any more than 5% the question one question too low classes assume that doesn't mean Wandsworth, does it mean London doesn't mean the UK, does it mean Europe and what is local and thirdly, where out where are we on this plan is there no plan at the moment but there will be one and if so by when?
well one and all those hopes the locals, UK 5 is that it's a plan, so you don't have to do any of it and you don't have to only have five, you can have more, we already have more because things like commercial property, it's UK it's involved in creating jobs, we are meeting that current requirement now obviously when you get fuller guidance you get tweaks and changes to it.
we will see what happens, but currently I would argue that we already meet those because we have our allocations to those we've got allocations to towards some of these areas that they overlap things, some of our private equity is also local.
is levelling up what we talked about, the octopus investment in cancer, well that's creating jobs at Sky to create 18.
fuel efficient way of delivering heat and energy in an environmentally mentally friendly way, so it's got several loser ticks, so this isn't saying that you that some of our investments would fall into a particular category, some of them will overlap and will actually account for more than one or these areas, so I don't think, as I said I generally don't think there is going to be
too much of a concern for us if the government are sensible and listened to how we respond on the explained part, because it is down to us to articulate how we're delivering all of these and, for the most part I think we are in full some parts, I think it's quite a grey area but I think the value for money reasons we can articulate.
and others.
pure and obvious that you wouldn't want to move them in, and I know that numerous funds have no intention to, and that is things like the passive mandate, whereas because she's so much money to lift and shift for no real benefit whatsoever and especially when you get and enable GPs share class it's overseen by the safe you would meet those sort of numbers but and specifically for local assets, it's UK it doesn't have to be five, it can be more, it can be less
for us as a fund already have 6% allocation, we're not quite there and fully up to 6%, about 5.6 or whatever it is in commercial property alone, that's all UK, so that should meet that requirement.
thank you.
0, I beg your pardon, Councillor Gasser.
yeah, I don't know, but obviously very new on this committee now haven't got to grips with everything yet, but I'm hearing an awful lot of disquiet tonight from the experts from councillors and from officers.
this is disquiet shared with colleagues across London and finance, is there some way of lobbying, this doesn't seem right to me that this is going ahead.
we had a consultation, it had huge numbers of responses to that consultation, the government responded within seven weeks and made their decision.
I note the high content I'm being naive, but if all of the pension funds across London or across the country said No, we don't want to do this, is that not possibility?
when?
a lot of what they said. People supported. There were certain areas where there was real common consensus around the matters. Most people responded negatively towards certain aspects, such as the 31 st of March 2025, so it was too quick too soon being directed to invest certain percentages of your assets into certain asset classes. Again, we're saying it's going to hinder individual committees. Fiduciary duty accountability remains local, not national. For all these returns. These are all articulated in the consultation responses that had numerous responses highlighting similar points, but the government have made their decision
Councillor Dick Adam,
I mean, I might have got this wrong as well, but isn't there a bit of a contradiction between some of the aims of the government and then?
the final secures a hospice being bought out by manual life.
in terms of the levelling up agenda is about local.
local investment in local practice, and it is a manual life, a Canadian company they are, but that's a separate point and on that not to do with levelling up and on issues, but I know I know, but I mean in terms of the overall strategy of I just can't work out, why is the government has?
that is where the money would be invested, not who the manager is so, so yes, I will come on to that I know, but they simulated in terms of like the fees and the ownership, and they're not in any way.
not really.
big secures is a OK so he's been bought out by by.
or a Canadian entity, but they are self autonomy. That's that's been run, the the key members are you know, but they are all based in the UK,
although the vast majority of the ce que s t currently space in the UK that team the core team is remaining so the the style and ever how they'll invested in defer they don't invest in secures didn't invests in the UK, they invest globally, predominantly Europe, so that really it isn't where the direction of the money and the aim of the government is when we're talking about local investments, it's not who manages humanity, it's where they deploy the money, and that's what it's what it's all about, so we can have international managers that will invest in the UK we will have UK managers that will invest globally and unalloyed the UK.
the central point about the local agenda is, or is predominantly trying to get more money into infrastructure assets that are going to drive.
and a levelling up a type agenda, I mean, I might say that a week would articulate the that we think we are complying already, because we have numerous assets already in certain areas, which is why, when we look at that that wider asset allocation review and why we didn't want more responded that we didn't like the government trying to force us and directors because they're looking at it in isolation of a particular asset class without looking at the fund overall.
a good example of that is where we've all talked about, we've all got decarbonisation approach and agenda, we saw setting ourselves targets, but if you think about we've already got our BBC, which is what we talked about being one of our most highly underperforming funds that we got in there, that is a sustainable equity mandate, it's in there to try to do decarbonisation but it's not delivering on return, we've got investments in renewable infrastructure, we've got investments in energy transition,
and even our core infrastructure mandate is has.
a large chunk of its assets towards the renewable environment. So way you've got prescription coming in, that's a one size fits all they haven't articulated or actually fully comprehended that you have other investments that also can double up and therefore we could be having a very much diluted portfolio. That's what most of us will try to articulate and advocate in our consultation returns, but it didn't get something, and my only point is I mean I might actually do
there is a part of me that thinks that an industrial strategy that involves local government being forced to invest in their own local, you know the Department that things like that isn't a terrible idea, but my problem simply is ironic if the money managers,
national organisations that are then brought in to try, and I don't know.
yeah, that was that was my only point, but I'm skipping ahead, I want I want to hear about that part of yet.
Councillor Sarah,
thank you, I just wanted to come back to the point around and you know complying and so on, which is what we were talking about earlier on.
transferring assets to the CIF.
if that's not done, we have to give an explanation as to why we're not doing it, do we know anything beyond that as to what the there as a consequences might be for us for not complying?
straight answers no, I can't give a definitive answer.
we can broadly give an understanding of what we think could happen because two, we know of two funds, have already been written to by the secretary of state, where, even previous to this response to the consultation.
they were not necessarily complying with the current expectations, then they are two London funds who were going to potentially have submit some changes or approaches to being how they would engage with the London CR-V. I have not seen the content the letter, so I can't comment on it all I can comment only about it is they have now signed the changes to the shareholder agreement which means they remained a member of the London C IV.
on the basis of that letter, which may give an indication as to what may or may not happen, but obviously I have not seen the letter, so I can't comment.
I think if there are any more questions, then I think we've concluded general pensions matters, and so that was only the first thing.
so the my jumping ahead so that we never have we not done yet, so the next bit is that is the on the till message, but it's paragraphs 4 and 5.
which is the the buy-in maintain, said it credit fund, I don't really intend to say much on this because we had a proper session later on, it was just to highlight for the open part of this meeting.
that we will be considering moving our current bond mandates into,
into the simulator.
do we actually have to take that decision tonight at the end of the introduction they're going to give, you need to say yes or no, we need to make that decision tonight, yes or no. Yeah yeah, I mean you don't have to say yes, I mean, that's what the outcome is, so probably me, when we brought here last to last committee, we introduced the paper we introduced what was happening, what was doing it was agreed at the Committee to bring them to this committee to present, to give you the ability to determine where we got a training session. So when, as soon as we've done, the finish, the open part before we invite the members
representatives from the CVOne from their underlying fund manager, Tony will give some training from from nurses.
DECC which hopefully you were seeing and were able to present from we've got some, mainly to look at the style differences between what we have and what this will deliver. Most of it is about duration, which is why we need to have that appropriate training and not to get an understanding about what the differences. So you can ask the relevant questions some to give you that informed decision, you don't have to say yesterday it may well be that you actually you have got questions, you're not comfortable, you want to see it run for a period of time, there could be some consequences on that. There's some discounts of isolation to how they did the fees, which they will need to convince you that it's the right thing to do now.
we know from what was said before the EU that we, if we haven't done it by the 31st of March 2025, will have to explain how we're what we're doing out is outside it delivers value for money and is in line with it.
and that would be for us for them to evidence why, if not, we're going to have to try and prove why it's relevant for us not to be invested, but yes, so the position today is yes or no doesn't have to be yes.
so that's it on the buy and hold, I would just say that we've on the next few paragraphs, it just updates us on the positive news in relation to progress that's been made on the
basically, the external audit of the pension fund accounts, and if there are any particular questions on that, I will refer to co Baxter.
yeah yeah, no questions OK, I would then go on to Nevin property fund again at the last Committee you received a report advising that the the fund had been suspended, the reason for that being,
that they had had some redemption lists and meant that the fund itself would be recently too small for its been keen to continue, so they suspended the redemption queue to allow time for them to galvanise the various different views. You asked me to go away and try to see if I could find other fund managers who were willing to take over fund to ensure that it continued rather than it for it to be moved into a closed ended a fund
I'm pleased to say that I've managed to galvanise at least two managers to engage with them, hopefully a third as well.
whether or not anything comes to fruition, because these are highly complex and the nature of the schemes, especially being.
having the tax issues associated with stamp duty and other approaches means that it is quite convoluted.
but at least a conversation is happening.
and will obviously provide you with information in due course, they've only got six months in order to conclude because that's when this is the second time that triggered the the suspension period, which does limit the ability to do things but on that note I can I can say that I know that there is at least two funds as of today currently in discussion with it and I will keep you posted as much as I possibly can so then there were there's any questions on that.
no.
then finding the then on this paper, which Councillor Dixon mentioned briefly ce que s, of been acquired.
by by many life, so ce que s are one of our multi-ethnic credit managers,
they are currently sit within London, see iv as their alternative credit mandate. What we are pleased to to say that, like with any things on this, you will always have some trepidation when there's these changes, but the key element for us is are the core individuals who are responsible for maintaining that strategy. Are they remaining and that there are some quite hefty, I think golden handcuffs type PR scenarios in there to make it a financial incentives for those core individuals to stay, which is very pleasing for us in the sense that you know there should be hopefully limited change we know, because we commissioned a research note from Mercer that the the basically the styles of the two entities compliment one another rather than and conflict and the fact that,
that many life doesn't have this asset class currently within their remit means that they are more likely to give themselves autonomy. This isn't the first time we've experienced this, there are other multi asset credit manager, Oak Hill were required by T Rowe Price and similarly, we had similar experiences that again because of the limited overlap or no overlap, that they were given that self autonomy, so we didn't haven't noticed any change, but, like anything on these, that you would be wanting to keep more of a watchful eye over them over the certainly the short term to see whether or not that self autonomy and direction
they still give them that freedom, so that was leading Tony on that one, you will need to add.
yeah, I mean I could I can give our research view, but in the private meeting.
so any questions about my new life, we should say for the private meeting or
it depends, but if you want, if you want messages to give you a professional style opinion, then yes, if you're happy for more general question, then it can be an open meeting.
so like a question about like know how ethical of an organisation, although is it an organisation that is going to have the same interests that we have on climate, on ethical investment, on?
because I did some Googling, basically when I read the paper and just wanted to know.
the assurances that we've been given at the moment, and this is why I say it's to keep the watch on, is that they will be given self autonomy so seats, the current management of ce que s will set the tone and the style of how they invest, we're currently comfortable with what they're doing in relation to those areas.
but that's what I'm saying we'll have to keep a watch on to see whether that changes, the assurances that we have been given are that those individuals who currently operate operate that fund, bearing in mind at the moment, Sir Michael Hintze is the owner of ce que s he is the individual who one could say was the many life element of it he no longer is on the scene, many life are taking over his element and the core administrative curtseying I that the CEO, the key CEO, the portfolio manager are all remaining on this strategy.
so the assurances that we've been given is they're not going anywhere, they're approaches and changing, we should be comfortable. That is something which we can only take at face value but need to keep a watchful eye on, and that's why I'm saying that's that's where we need to be to be learned, to look at the only thing we've got to compare it with is what we've had previously, when a similar manager got taken over and was told that they would have self autonomy, we've not seen any change there, so that's all I think that's the only assurance I can give you. Unfortunately, we don't know whether or not that will change in the future and that assurances that we've been given will will be will be capped. But that's why we do need to keep that that watchful eye, but what we told at the moment is it shouldn't change
thank you, if I can just paraphrase what superiority is saying.
in a different way the the way I understand it is every investment fund has its sort of
objectives and investment policy that hasn't changed, it's just the actual ownership of the company.
as I said she changed, so the way the fund is managed and the objectives in investment policy remain
exactly right, the the only new answer to that is they are just a lot merging the name and they're going to self, promote each other, so for commercials they I think they're trying to to do a bit more than just stand alone and one and I own the shares. I think there's there is going to be greater integration when it comes to sales and try to get cross investment, but as to how the money is managing this portfolio, that shouldn't change. For the reasons you've I highlighted
could so I wanted to jump ahead again, have we now reached the end?
but thank you.
so were asked to note all the updates provided in that report that they will duly noted, Thank you very much, so we're now going to go to agenda item 7 where committee is asked to decide, having regard to the particular nature of the business, to be transacted whether or not to exclude the press and public during consideration of items 8 and 9 on the grounds that they are likely to disclose exempt information by virtue of paragraph 3 of Part 1 of schedule 12 A of the Local government Act 1972 is that agreed? Thank you very much, so please can the webcast be stopped