Joint Pensions Committee - Tuesday 15 October 2024, 7:15pm - Wandsworth Council Webcasting

Joint Pensions Committee
Tuesday, 15th October 2024 at 7:15pm 

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Good evening ladies and gentlemen.
My name is Norman Marshall.
I'm the chair of the Joint Pensions Committee.
And I want to welcome everybody who's
come along this evening.
I particularly want to welcome Aisha Shah and Michael Stone,
who we're going to be hearing from a little bit later,
and also everybody in the public gallery.
It's quite unusual for us to get this many people.
When we get onto the agenda item about the Audit Committee
meeting, you'll find out exactly why we never normally
get anybody here.
But this is a very, very serious matter.
I don't want to make light of it.
And we very much welcome and value your input.
I just want to say a few words about the process
that we're going to be following so you understand,
everybody understands how we're going
to be running things this evening.
There are some procedural matters
which we're going to just cover off for a few minutes.
And then we're going to get onto the presentation
of the petition.
Have you decided which one of you wants to go first?
Michael will go first, and then Aisha will go first.
Each of them will have five minutes and that's a number that's enshrined in
custom and tradition. The councillors have five minutes to speak about
anything. We have a little traffic light system, there's some lights out there.
There'll be orange light after four minutes and a red light after five
minutes and soon after that I'll be hoping that you'll stop. There are
electronic sanctions that can be taken if it goes on very much longer than that.
don't involve vaporizing you but do involve your microphone not working anymore.
I'm sure we won't come to that.
Once they've spoken, there'll be an opportunity for the members of the committee to ask Michael and Aisha questions.
Once those are done, I'll be asking you to return to the public gallery.
And at that point, members of the committee will be asking questions of the officers present, who I'll introduce in a second.
But that's where we stand.
I would just like to say that we're not taking questions
from the gallery, but that's not part of the process.
But I noticed the request to ask questions,
but that's not part of the process.
I think I speak for everybody here
that we are all deeply, deeply affected
by events in the Middle East and whatever we can do from where we're sitting to help matters,
we would like to. What is possible remains to be seen and we hope to learn more this evening from
you. I'm sorry I can't take contributions from the gallery. So moving on, first of all, members
of the committee. We will now call your names in alphabetical order. Could you please switch
on your microphone to confirm your attendance?
Councillor Caddy. Good evening.
Councillor Craigie. Evening.
Councillor Crookedake. Good evening.
Councillor Dickard. Good evening.
Councillor Gasser. Good evening. Councillor Ireland.
Councillor Pridham. Good evening. And I think Councillor Sarah is probably
delayed in traffic and will come along later. I don't think we've received
apologies from him. No. We have a number of officers present who will introduce
themselves when they address the committee. So the item one is the minutes of the meeting
of the 26th of March 2024. Members, are there any objections to confirming the previous
minutes of 26th March as a correct record? No objections. Item two, Disclosable Pecuniary
interests? Yeah, I've got to announce that I'm a member of the
Palestine Solidarity Campaign, which is relevant to the deputation tonight. Are
there any other interests to declare? Councillor Gasser. I'm a member of the
scheme because I have a very, very tiny pension pot from when I was a councillor
many years ago. Thank you. So, yes, now we move on to the presentation of the
petition. We have received the official tally that I have got,
it is 2 ,360 signatures from ones with friends of Palestine and a
deputation request from the group to speak on this item. So I
would like to formally propose to members that we accept that
deputation and ask them to speak. Is that agreed?
The floor is yours.
Thank you.
I speak as co -chair of Wandsworth Friends of Palestine, representing the now 2 ,500 adults
in the borough who have signed our petition calling on the Council to disinvest from companies
that invest in Israel.
We have particularly strong support among our Muslim residents, who in common with all signatories look in horror,
not only at the unimaginable brutality and cruelty of the actions of the Israeli forces in Gaza,
but also feel utter dismay at the failure of UK politicians across the spectrum to condemn what Israel is doing.
So what is it doing? Let's hear from the mother of three -month -old Anwar.
I was displaced along with my husband and my only son.
There was no formula milk due to the Israeli siege,
and there was no milk in my breasts due to the lack of nutrition
and the prevention of the entry of aid.
My son cried all night from hunger.
His temperature rose and he started having convulsions.
Four days later, Anwar was among a growing number of children
to have died from malnutrition.
Defence for Children International reports an incident in which Israeli forces detained
around 50 Palestinians, including 12 -year -old Karim.
I say again, 12 -year -old Karim.
Israeli soldiers forced them to take off their clothes and bound their hands before forcing
them to walk in front of Israeli tanks.
Let's hear the words of Karim.
They insulted us, slapped me on my face,
and kicked me in my stomach and waist.
I almost died from the beating.
13 -year -old Ibrahim described his interrogation.
They kept telling us they would kill us,
kill us all, and unleashed dogs on us.
One of the detainees with us was bitten by a dog.
We heard him scream in pain as the dog bit him.
Israeli forces hit his mother with a rifle.
unleashed dogs to bite detainees, insulted them with vile words, and
threatened them with rape. 13 year old Shehada told her father, Dad, I saw death
with my own eyes. The soldiers were debating in front of me whether to crush
me under the tank chains or to let the dogs eat me alive. In the last 48 hours,
and here I quote the BBC,
an Israeli attack on a school used to shelter displaced Palestinians
has killed at least 22 people, including 15 children.
Earlier, five children were killed by a drone strike
while playing on a street corner in northern Gaza.
Graphic images from the scene show the bloodied bodies
of what appear to be young teenage boys.
One of them looked to be clutching several glass marbles in his hand.
The situation in northern Gaza is desperate, the UN says.
It has also condemned the quote,
large number of civilian casualties unquote in recent days.
I know there will be enough intelligence and compassion in this space tonight
for us not to be confronted with the ridiculous accusation that we are defending terrorism.
terrorism. This seems to be the lazy get -out card of every morally redundant naysayer who
seeks to oppose our desire for peace. Let us be clear, the daily acts of terrorism in
Gaza and beyond are those being perpetrated by the government of Israel. Each additional
death deepens not only the heartbreak but the anger, the growing hatred and the inevitable
desire for revenge. We march through London every few weeks in part to say to the people
of Gaza that the horrors being done unto them are not being done in our name. We want to
send them hope, solidarity and love. You tonight have the opportunity to take practical action
that will help these people. I hope you will take that opportunity for moral reasons. I
say also though that companies that invest in Israel are facing mounting global criticism.
As such, these companies do not represent the sensible, secure, long -term investments
that well -run pension funds require.
Therefore, in addition to the moral outrage I hope you all feel, and your recognition
that continued investment is unacceptable to many of your electors and your employees,
and your recognition that it is utterly incompatible with the Council's policy on ethical investments,
Continued investments in companies that invest in Israel is also not financially astute.
What we need from you tonight is a clear, absolutely unequivocal statement of opposition to the genocide in Gaza
and commitment to divesting funds from companies that invest in Israel.
What then happens cannot be done overnight, but it can be done.
The London Borough of Waltham Forest, a co -investee in your fund, has already taken strides in
this direction, as has the London Borough of Islington.
We know it won't be easy.
We want to work with you to achieve it.
Failure to take this opportunity or to seek to fob us off with some half -hearted, mealy -mouthed,
trite form of words that does not totally condemn what is happening will be unacceptable
to the 2 ,500 residents who signed our petition and to a large number of voters you will need
to face in 18 months' time. It will, much more importantly, be unacceptable to the children
of Gaza who so very desperately need your help. Thank you.
Thank you.
Sian.
Good evening, committee.
Chair, Councillor Marshall, thank you for giving me the opportunity to speak today.
I am Aisha Sian, branch officer of Richmond, Twickenham and Kingston Palestine Solidarity
Campaign.
The branch formed in the 1990s and has a member and supporter base of 5 ,000, and now a youth
division and collaboration with other groups.
We are fast growing in our local community.
I sit here confident in the knowledge that I'm representing not only local residents
who are supporters of Palestine and who want peace and justice for all, but we also have
the support of the TUC and its members, the 300 ,000 supporters of national PSC, and the
general public.
Unions have called on the government to immediately recognize Palestinian statehood, end the arms
trade with Israel, and demand a permanent ceasefire in the Israel -Gaza conflict.
The TUC passed motions calling for the release of all hostages and Palestinian political
prisoners and a renewed focus to advance the strategy of boycotts, divestment and sanctions,
and all unions to make themselves apartheid -free zones.
Local GMB and Battersea and Wandsworth TUC have also recently passed motions to support
us today in our endeavours.
It is obscene to continue being complicit in arms sales and profit from the sale of
arms when two senior Israeli leaders stand accused of crimes against humanity.
But let's not just end it here.
Let's go broader.
More than 70 % of the British people support an immediate ceasefire in Gaza.
Among those who voted for the governing Conservative Party in 2019, 67 % backed an immediate ceasefire,
according to polls released on Friday and commissioned by Medical Aid for Palestine
and the KABU, Council for Arab British Understanding.
86 % of Labour voters backed the call.
40 % of Conservative voters believed the UK should stop selling weapons.
Only 24 % opposed it.
As for the Labour Party voters, 74 % favour the UK halting deals,
compared with only 7 % who opposed the call.
As of June 2024, the State of Palestine is recognized as a sovereign state by 146 of
the 193 member states of the United Nations, or just over 75 % of all UN members.
So my point here is that the support for our demands is growing, not only locally but nationally
and globally, pressure is rising on all institutions to boycott, divest and
sanction. This is something that none of us can ignore and all of us need to play
our part in finding solutions to end the oppression and the genocidal intent to
erase the race of people and counteract the uncertainty it is creating in the
world. The rhetoric of Israel defending itself no longer exists and the
and the need for divestment grows.
For decades, Israel has violated international law, including UN resolutions and ICJ orders.
This year alone, it has bombed dozens of UN premises in Gaza, killed hundreds of UN staff,
accused UN officials of terrorism and anti -Semitism, among others.
Now it is attacking peacekeepers in Lebanon.
It is a scandal that the deferred wages of local government workers are being invested in companies enabling
Israel's grave human rights abuses. Your scheme members who are aware do not want their money being invested in killing innocent civilians.
The UK as a state party to the Genocide Convention has a legal responsibility
to take action to deter and prevent genocide in another state.
You providing the money to do that may be seen as being complicit.
In a judgment handed down on the 29th of April 2020 by the local government pension scheme
advisory board Supreme Court, the Law Commission and specifically Lord Wilson noted that there
is a general acceptance that administration authorities may take non -financial consideration
where scheme members would share the concern at the same time as looking at the financial
returns.
The hurdle of the Economic Activation and Public Bodies Bill has been removed earlier this year.
Just the other day, credit ratings agency Moody's downgraded Israel's investment rating for the second time in the last year.
One more downgrade and Israeli bonds will officially be considered, quote, junk and no longer is investment grade.
It's clear to even global financial experts that Israel is a bad investment.
Two minutes.
Just the last paragraph, please.
Finally, I say to you, the UK, US, and Israel were the last to end support for South Africa.
Divestment was one of the most effective tactics in ending South African apartheid.
What have we learned from history?
History will judge us.
Is this what our local community wants to be remembered for?
We have a moral and a financial obligation, so let's work together to end this madness.
And we cannot and we will not let public money be used in this way. Thank you.
Thank you very much for those very eloquent and impassioned speeches.
The strength of your feeling is abundantly clear.
I'm now going to ask members to put any questions they want to Michael or Aisha.
Sorry, with respect Chair, I've been working on this for three months.
The Council website says the presentation should come to the whole presentation.
I've been working with the Clerk of this committee. He was under a mistaken impression.
Mr. Cairns, I'm very sorry, but you're under a mistaken impression.
This meeting is not open to comments from the gallery.
Whatever impression you may have formed,
I'm afraid that's not the case.
So I must ask you to be silent.
Mr. Cairns, I must ask you to be silent.
I'm afraid if you can't be silent, you will have to leave.
I'm very sorry, but that's the case.
We have been told we are going to ask President
Fadz -Bawia, if he states the website, that is the way it goes.
The committee can ask deputation members, not just the two sports people.
Mr. Cairns, I'm afraid you will ask to be
leave unless you can, I'm afraid you're mistaken in your assumption and with
every respect we are not following whatever process you've read or thought
you've read and you I'm afraid I will have to ask you to leave I'm very sorry
about that but please can you be silent
I'm afraid that's not the case I'm afraid that's not the case I'm afraid
I simply can't allow you to carry on disrupting these
proceedings.
I respect your point of view, but on a procedural matter,
you're simply wrong.
And I will have to ask you to leave.
So please, please, I'm asking you, with every respect,
please can you sit and listen to the questions
and allow the process to follow.
Thank you.
Members, could you please put your questions to Michael
and to Aisha.
Yeah, so I'm going to ask questions directly
to the people who have given the deputation,
because I'd like to hear your feedback.
And I was particularly interested in what you said
about the legal imperatives around Al -Islam from Israel,
the Lord Wilson report.
Could you expand a little bit more on that, please?
Sorry, Councillor Dick,
and you need to repeat the question.
I couldn't quite hear you.
So I was interested in what Aisha was talking about,
the legal imperatives,
because we haven't heard much about that,
so it would be useful to get some feedback on that.
As I said before, the judgment was handed down in 2020 by the Local Government Pension
Scheme Advisory Board, that general acceptance that
administration authorities may take non -financial consideration
where scheme members share the concern and look at financial
returns.
So this is in response to the anti -protest and anti -boycott
bill that had its second reading and did not pass.
The motion did not pass in Parliament.
Up until that point, councils were reticent in sharing, in divesting and in actually making
decisions.
Now the path is clear.
there is no hurdle in councils actually making decisions to divest.
Thank you.
Councillor Crook -Daker.
Thanks. I'd like to ask
Mr. Stone, what's your view of us asking central government to consider sanctions prohibiting all funds
from holding these assets to sort of create maximum impact?
I think if you could persuade the national government to act in this matter,
I think that would be absolutely fantastic.
I have to say that I don't fancy your chances of doing it,
but I wish you every success.
I mean, yes, let's ask national government to do this.
The point is that in advance of that, it would be a very powerful statement
that the London Borough of Wandsworth has decided to disinvest
all of its pension fund from Israel,
and it has done so because of its outrage at the genocide that is taking place in Gaza.
So the two things are not mutually exclusive.
I continue to ask you what we've asked you tonight,
and I would very much welcome your support in making that appeal to the government.
Thank you.
Councillor Gasser.
Yes, thank you very much for coming and talking to us.
I'm interested in, you mentioned about a couple of other councils,
Waltham Forest and I've forgotten which other one.
Just I wondered what they've been able to do along the road to responsible investment
and what we might be able to learn from them, what has actually been achieved so far?
I think the key thing is that what they have done is made a clear commitment that they
wish to disinvest in Israel, disinvest in companies that invest in Israel and they want
to work with their pension fund managers to ensure that that happens.
The thing that can happen this very evening is that you can make that statement.
Now the practicalities, some of the pension fund arrangements have time constraints.
It is not that you would make that commitment this evening and we would be on your doorstep in the morning saying,
but you're still investing.
It is that you would have given a clear commitment to disinvest at the earliest opportunity and a clear commitment to disinvest
because of the horror of what is taking place in Gaza.
So, obviously, I understand the people from Walton Forest, or some of the people from
Walton Forest, are willing to work with you and cooperate with you and to guide you.
Perhaps Aisha can say a little more about that.
So, what they have asked and what the Council is committed to is to disclose and publish
all current investments in an open and transparent way.
They've also making a timeline for divesting from companies complicit in the human rights
violations and war crimes.
So we know this is not an overnight step.
It will take time.
And we know what is involved in that and we're willing to work with you to achieve that as
long as we have access to investments, current investments that you have.
And it aligns with what the information that we have.
They have also agreed to make a public statement, Waltham Forest Council, on the Committee's
plans for diversifying from war crimes and also to report quarterly on divestment as
standing item on the pension committee until the divestment goals are reached.
They have also had somebody from their committee go on to be on the London CIV as a sustainum,
I think they're called a sustainability group, and so an officer from the committee has joined
that group and will be willing to work with us and with Waltham Forest and yourselves.
I think collaboration between councils will be very good and it will give us that power
to actually make things happen.
Thank you.
Could I just say one more thing in response to the same question very briefly?
Aisha has given much more detail of the practicalities.
The statement matters too. There is a statement being made outside this building where the flag of Ukraine flies above the town hall.
That presumably is looking to tell local residents that you support the citizens of Ukraine, which has been invaded by a hostile neighbor.
Why is the flag of Palestine not flying above the town hall?
What is the difference and
And can you imagine what a powerful statement it will make to your electors?
And when word – and I promise you it will reach the citizens of Gaza – when word reach
the citizens of Gaza that one of the most high -profile local authorities in the country
has taken an absolute commitment to disinvest in Israel because of the horror of what it's
done.
Imagine what it will feel like to the people who saw those children burn in tents over
the last 48 hours.
Thank you.
If there are no further questions, I'd like to thank you both very, very much for joining
us.
And if you wouldn't mind taking your seat in the public gallery now, I'll thank all
the committee.
Thank you, we appreciate the opportunity.
Thank you.
Thank you.
Thank you so much.
The moment now as we are now moving on to questions from the members of the committee
to the officers.
I'd like to start.
I'm sorry.
I'm now going to ask the officers if you could please remove the gentleman who's continuing
to talk after.
I've given you several polite requests to stop interrupting this meeting.
could you please ask the gentleman to leave.
Sorry, can you please, please, please, those two gentlemen, Mr. Cairns and the gentleman in the middle.
I'm sorry, we cannot carry on giving you warnings that are not ignored, that are not followed.
I'm completely confused.
The deputation is the people that sit there.
If you guys were with the deputation, I just don't understand why you weren't sitting with
the deputation.
Why are we giving these numbers here?
Gentlemen, ladies and gentlemen, if you want to continue here, please can I ask you to
either sit down or leave, but at this rate I'm simply going to have to ask the gallery
to be cleared, and then that will be the end of that discussion.
You'll have to watch the rest of it on television.
So please can you not put us in this position?
Your deputation has had ample opportunity to speak and answer questions, so can you
please either now take your seat
and not interrupt proceedings or leave.
Otherwise I'm gonna have to ask the gallery to be cleared
with great regret
because this has been a very good discussion so far.
Thank you.
Thank you very much.
So we're now we're going to ask,
the members are gonna ask the officers some questions.
I've got one which I'd like to start with which I think is helpful just to clear because
it just sets out in my mind what some of the constraints that we face are.
There are some practical matters here, but I'd like to ask Mr Gelotti, who's our Deputy
Director of Finance and runs the pension fund effectively, could you please outline the
difference between the investments that we make through our pension funds and the more
usual process of investing in shares in companies?
Certainly, Chair. As a pension fund, we invest through individual investment managers, and
most of those are directed through our pool, which is the London CIV. We don't actually
own underlying stocks, so all of our assets are indirectly invested within that. By that,
I mean that if we had, for example, a £100 million investment in a global equity manager
which had 20 equal weighted investments, i .e. £5 million of each, if we wanted to exit
one particular share, i .e. £5 million, we're not in a position to do that because we don't
own those underlying £5 million worth, we own the £100 million. So in order to alter
and change that type of investment, we would need to exit the full 100 million. Historically
in the past, prior to pooling, when you had segregated mandates and you owned the underlying
shares, you were able to make those decisions. But in pooled investments, you don't have
that ability.
Thank you.
Councillor Criptake.
Thank you.
To Paul, to address this issue, can I ask you the same question I asked previously?
What would your view be as asking central government to reconsider sanctions prohibiting
all funds from holding these assets, creating maximum impact but also getting around this
problem of us having to sell a lot to diverse what is a relatively small amount.
Okay, so as an officer I can't give a political comment. The clear I can say on that is to
do the, explain the difference between Russia and another sovereign entity. With Russia
the government have made particular sanctions in relation to how we invest and what companies
cannot be invested, that means that the underlying investment managers cannot invest in them.
It's not a decision for any one individual or any one individual fund. That is the strength
in having a government lay down those sanctions and lay down that in legislation rather than
individual funds making decisions in their own right.
Councillor Gasser.
Yes, thank you. I'm also going to ask the same questions. I was interested in what other
local authorities are doing in London, are there any we can learn from or should we be
collaborating, as the Speaker said, the collaboration across London, would that be helpful to us?
There's 32 London funds, all are operating different ways, they will have differing views,
they will have differing profiles in relation to their investment strategies. I have had
wider discussions. In relation to what they are doing, it's not for me to ask to respond
as to what's been said today and necessarily what they are able to do and what they will
be doing, what advice they've been given. So I'm not going to answer directly in relation
to that. What I can say is London as a whole are talking to one another. This isn't something
that is in isolation for this committee alone. Petitions have been put in front of several
funds and all of those funds have made different decisions.
But what we are doing is we're working collaboratively.
As you've heard, not just in this committee, but in previous meetings,
we invest through a collective investment vehicle that we don't invest directly on our own.
The investment regulations have been very clear in the direction that we need to do,
what we're obliged to do.
It may well be grey as to exactly what timelines we need to work to
before all of our funds are pooled.
But that is what both the previous government
and this government have sent a clear message.
We need to pool our investments.
That means any decisions that we are able to make
on a pragmatic and a long -term basis
will need to be through that pool.
Councillor Dickard.
Could you please outline an understanding
of a path to a responsible development,
responsible investment might look like?
What are the kind of barriers and what are the obstacles
if we are to go in this direction as a local pension fund?
Yeah, certainly.
So your role here really as your quasi trustees,
the pension fund is not just for the current individuals.
We roughly have about three,
just over 3000 active members,
but there are about 40 ,000 members all in all
when you take into account those that are currently working,
those that have worked previously and are no longer
in the pension scheme and those who are
drawing down on their pension.
There are a number of employers in the scheme,
Richmond and Monsworth are not the only employers.
So you can see there was a very large range of stakeholders
whose interests that you as trustees
should be looking into.
As was mentioned earlier in the deposition, the committee are able to make non -financial
decisions.
However, and this is the however, it has to be under very clear and proper guidelines
procedures and they are set out in all of the guidances that have been issued, both
by the Scheme Advisory Board and by others, and set out in the regulations as well.
and that is that any non -financial decision can only be made subject to having received proper advice,
that following that advice you can understand that the impact of such decision does not create any significant risk,
and that you have the belief that your members will support the actions that you are taking.
So it's a very clear pathway that where you need to go down in order if you wish to make any non -financial decisions.
Have we ever balloted our members in that or gone out to consultation with our members
on something? Is there any precedent for that? Have we done that before?
We've not made any non -financial decisions. The decisions that have been made here, even
when they're taking other issues and other matters into account, have been evidence that
they are in the financial interest of the Fund to do that.
Councillor Ireland. Thank you Mr. Giuliani. Just following on
from that, how does this situation differ from the challenges we faced when we took
the action on climate change?
Okay, so I mean the climate change is fundamentally different in the sense of where we are currently
today. When we went out to look towards that pathway, substantial training was provided
to members to understand the implications of making such decisions. We actually sought
proper advice from MRSA, our investment consultants, who did a lot of detailed analysis, looking
at the impact the portfolio would have had if temperatures were to rise on a two, three,
for a degree basis, that analysis was presented back to this committee.
Rather than actually be a detrimental impact by making those changes,
it showed it was positive, it was in our financial interest to do so.
If we were not to do so, then it would have a detrimental impact.
That showed that it was not a non -financial decision
that when you were making that call, it was in our financial interest.
And even with that, we still took it back to the local pensions board
to show them the evidence that we had in front of us
and why those actions were being taken.
I'd also say that in that matter, as we invest through the pool,
there are investment opportunities today that we're able to do,
to invest in those with those tilts.
Our passive investments that we moved to have a targeted tilt and that therefore was options
were available to us.
And we've got assets such as our energy transition infrastructure mandates, our renewable infrastructure
mandates that are already in existence that actually target those agendas.
With something of a disinvestment approach or others different to something like this
particular petition, the opportunities out there for investment as of today do not exist
in the same way that they do for doing our net zero climate change target, which is a
2050 target. It's a transition approach, which is why it's easier to implement, and was evidence
that it was in our financial interest to do so.
Councillor Caddy.
Thank you very much. Do I take it that should we take into consideration any non -financial
factors such as humanitarian issues that it would have to be looking at generic humanitarian
issues rather than any specific conflict?
Members can make targeted decisions if they choose, but I go back to the idea of it has
to be subject to three matters. Proper advice, the impact it would have and whether members
would support it. So you are able to make any decision that you wish. However, if you
are looking at it on a more specific, more narrow window, it would be more challenging
to see how that could be kept long term and sustainable long term as the world changes
as things move. A more general approach may well enable you, again I go back to having
received proper advice, have something that managers could have investments that could
be kept long term, rather than it being something that would need to be changed more frequently.
But you would only know the outcome of that if and when you receive proper advice accordingly.
the
, the
scheme advisory board released a statement where they cite a
Supreme Court judgement which as part of it says that it's not
appropriate for political preferences whether local or
national to take precedence over what is required under fiduciary
duty. If we were to go forward with something akin to what is
being proposed tonight, is it just about making sure that the
members are comfortable with that social media campaign or
process? Is that the only thing we'd need to do in order to comply with that?
No, you would need to get advice to understand what the impact on any decision that you made
would have and that you would need to be able to demonstrate that any decisions that you
made were not going to have a significant impact on the financial position of the fund.
So if we were to receive advice, hypothetically, which said that it would have a significant
impact on the fund and we were to nevertheless choose to
divest, that would be against that judgment, is that correct?
It would be against guidance.
I'm not a lawyer and I would want to get legal opinion if you
wish to go down that pathway.
It was just to say presumably as well as significant financial
detriment or no significant financial detriment, it would
also have to have the support of the scheme beneficiaries one way or the other?
Correct. Like I mentioned, I think it was either in this answer or a previous answer,
there are approximately 40 ,000 scheme members and there are numerous employers.
So if we didn't satisfy ourselves that that was the case, then we would be in breach of
our fiduciary duty?
Again, if you wish to make that decision, I would defer to legal to get legal opinion
on that. But I think it's very clear in all the guidance and not just from the scheme
advisory board, but back in 2016 when the
statutory guidance on the investment regulations
for which this is outlined were very, very
clear.
And that says is that yes, you can make these
decisions, subject to.
And that subject to is key.
And there are three things, not one to, you
know, that you only need to do one of the three,
you need to fulfill all three aspects in order to
make this a compliant approach.
But like many things, unless they're tested in
I can't sit here and say exactly what the implications will be.
Councillor Dickerton.
Yeah, so just because I think a lot of people will be watching this online because it's been publicized. So in to put into kind of layman's terms
You know, we've discussed this at length. We don't own shares. So the the shares that get raised with us
We don't actually own those shares
So we can't make a decision to sell those shares because our
funds are pooled into a collective fund with lots of
other councils.
So we wouldn't even own a share within that fund.
We'd own a proportion of the shares.
And then we allocate the selling and buying of those stocks and
shares, which could be happening within seconds or minutes based
on the decisions of those fund managers.
So when I ask my question about the pathway, what is, you know,
in your kind of professional opinion, what does that pathway
look like, if that is the framework through which local government pensions work? Is it
that you have a chat with the fund managers? Is it that you have a chat with the SIV? Like,
what is the best route through which we would come up with a pathway?
So there are two different styles and two different approaches. You've obviously got
passive mandates and you've got active. Passive is more challenging because they invest against
the whole element or the indices that you wish to do so.
But you could, those indices could, if they wanted,
set up a separate sleeve that would exclude
certain individual stocks or geographical areas
or sectors that are out there.
We have some tilts already,
like the Future World investment.
That is a tilt, it is passive, but it's tilted towards
more environmentally friendly approaches.
But we're not a fund of one.
Setting up a fund of one would be very, very expensive.
What you need to be able to do is come to some common consensus
across numerous investors to make it economically viable
for funds to set something up.
And that's what exists with cluster munitions, for instance.
So I remember when I first came on this committee,
I learned that there are certain arms and munitions
that we've always had a kind of ethical red line on.
So is that what you're talking about?
that we would have to introduce a new set of normative frameworks
that are similar to the ones on cluster munitions, is that...?
Broadly, yes.
I mean, the Future World Fund, I think, excludes those,
and if you look at what the London CIF would do,
that's the aspect of where it would be.
It would be broadening their definition of humanitarian aims,
and whether or not you would have one fund or several,
because you've got 32 London funds.
And this is not just a London issue,
this is an LGPS issue with the 80 plus
and a much more global approach.
The funds and what really achieves real outcomes
is engagement, whether it be engagement on a fund level,
whether it be engagement on a local independent company.
When you own shares and you sell them,
they don't disappear, they're still there.
And so to get the approach and the understanding
around how things are to do a proper genuine pathway.
It is trying to work together, have a common goal, common consensus, collaboratively, because
that won't mean that you've just got the three billion pounds of Wandsworth.
You've got a much more bigger weight, which makes it much more financially attractive
for investment managers to set up something that is in line with a more general collaborative
approach.
If there are no more questions, thank you all for contributing. Thank you for coming
along, members of the gallery, visitors of the gallery. I do want to reiterate that we
are committed to a responsible investment policy. We genuinely want to pursue this where
we can. You've heard, for example, how we sought to align our pension fund with the
goal of achieving net zero, which did come at a financial cost, and we changed the weighting
our investments accordingly. That has been successful, but it took several years. That
was a much less complex issue than the one that has been brought to the committee today.
It really is very technically and legally complicated for us to align our policy with
what is being asked. What we do want to do is evaluate our options. What I would like
to propose to the committee is that we ask the officers to go away and evaluate all our
options and assign some risks and possibilities of success to each of those options and bring
them back to a future meeting, hopefully not too long from now, so that we have a full
understanding of the options that are actually available to us that we can then proceed with.
We agreed.
I think that is absolutely part of the remit of considering what the different options
are available to us. We cannot realistically do this by ourselves and have the impact that
we would like to, but working with central government, working with other London councils
has to be part of the way forward.
The minutes of the local pension board, item number five.
I would like to ask Mr. Gelotti to introduce this.
I think it's more there for…
You are human beings, you are not machines.
You have parts and bodies and souls.
For God's sake, do the right thing.
in the right way, you have children and grandchildren
that are no different than the...
.
So, Mr. Gelosi.
I mean, really for information, this is just the minutes of the actual meetings themselves,
so if there's any questions, I'll ask or I'll defer to Ms Blackstone.
Members of the committee, I hope you've all had a chance to have a look at the minutes
of the local pension board. Can I just ask you to note that report for information?
Thank you very much. Number 6, and Mr Jalotia, I will ask you now to introduce this, the
external audit report on the 2023 -24 accounts.
Thank you.
I think we've got Ben from EY to be able to present, and I've
also got Coral Baxter who leads on our accounts.
So if there are any technical questions on the accounts, don't
be surprised if I defer it over to her.
But I'll let EY present and introduce unless Coral wanted to
say anything in particular first.
So, yes, I will take the report as read, but I will just draw a
kind of a few points.
So, this is a draft audit results report on the 2324
pension fund audit.
It is an audit that is absolutely on track and is
actually substantially complete, so in a very positive place.
So, huge thanks to management and all involved behind the
scenes in helping us get to this positive position.
On page five of the report, I noted at the time of writing a number of outstanding items
that were still being kind of concluded.
They've all moved in the right direction since writing this report, so the internal quality
reviews piece on our side continues to move in the right direction and nothing significant
has come out of that.
There's a couple of technical bits and pieces that are just kind of getting over the line,
but again, there's nothing I feel I need to bring to your attention around any of that.
I think the thing that you'll probably be quite interested in is just the how do you
now get to the point where you sign these accounts and you'll be aware that
from previous conversations the 22 -23 accounts are also at the moment unsigned
for the pension fund. That's related to those historic backlog issues across the
wider local authority sector and as you'll know the ones with Borough
Council 22 -23 accounts are in the process of navigating their way towards
assigning but that will be a disclaimed audit opinion. There was quite a momentous
moment on the 30th of September where the key legislation that needed to work its way
through government was passed to enable us to enact a disclaim opinion. So that will
allow the 22 -23 financial statements for the council to be signed in that way. That will
then allow us to get on with the work of actually signing the 22 -23 and the 23 -24 accounts by
the relative backstop dates that were brought in by that legislation.
So hopefully that makes sense to the committee because that's something we've been talking
about for a little while, but the key takeaway here is the piece of legislation that we needed
from government to be able to get these audits finally back on track and get back into the
sort of typical way of doing audits in a typical timeframe has now passed.
So we're just working through the technical pieces
around that.
But for you as a pension fund committee,
I would reiterate for both years that we're talking about,
hey, you're having a clean, unqualified audit opinion,
it is that link through to the council that
is the sort of tricky bit here.
And we've not yet got any ability
to disentangle those two things.
So your accounts continue to sit in the council accounts.
But we've got that key piece of legislation now.
So in terms of next steps, there'll
We have sort of finalized the 22, 23 final top -up procedures
just to get that work up to date.
There's some final inquiries that we do right up
into the date of signing.
And then we'll be able to sign that set of accounts we expect,
either later this month or into November.
We'll then be able to issue a final version of this report
that you see today that just closes down
any outstanding procedures, but also moves to the audit opinion
stage.
And again, we absolutely are able to do that
before the backstop date of 28th of February.
That will mean that you've got a 22, 23, and a 23,
24 set of accounts signed, and we move into 24,
25 planning in what is a much more normalised timetable
than what you'll have seen in previous years.
Appreciate quite techy, and it's a sort of catch -up of things,
but the key takeaways are clean audit work across both years
for the pension fund, and ability now
through that legislation to be able to actually sign
the documents because of that link
is through to the council.
The other things I'd bring to your attention
in terms of the work that we've done
is there's no significant audit differences or errors
that we've identified through the work today.
We continue to be independent as your external auditors.
I think that's important to note for the minutes.
And the work that we've done around particularly level three
and level two assets is quite judgmental
and quite tricky work.
So really encouraged, I think, to see management assumptions
and work behind that that we're really comfortable
with, including our specialists who look at this stuff across the sector and absolutely
are comfortable with all of the conclusions, assumptions and methodologies you've come
to to arrive at those asset valuations.
I will pause there and take the rest of the reporters' read, but I'm of course happy to
take questions.
Councillor Caddy.
Thanks very much.
It was just on page five of your report.
I wondered what you were waiting for from the monitoring officer, whether you got it,
and what that issue was.
That is a relatively standard enquiries letter that we send to essentially ask the monitoring
officer if there is any sort of information they feel we should be aware of as external
auditors, so it asks a sort of standard set of questions.
As of this morning, we hadn't yet received that letter, so I think we are still waiting
on that but Coral may tell me it's come in the last 24 hours.
I'm slightly surprised because it sounds like that would be the kind of straightforward
thing that we'd be able to get to you fairly rapidly without having to have it in a report
like this so I don't know if we can take that away and investigate it, why that's so delayed.
Thanks.
I'll note that point and discuss that with Mr Gilotti.
If there are no further comments then Councillor Crook -Dake.
Thanks. I just noticed in terms of your level three investments, you did a sort of range
test of plus or minus 15%. I just wondered why you picked 15%. You didn't seem to be.
So that will largely come down to the materiality level we set, which is, you know, so there's
There's a materiality methodology that we follow that's quite standardized across types
of organizations and pension funds will have a certain percentage of assets that we will
use as our materiality level.
We can scope that slightly differently depending on the level of risk and error in an organization
in previous years.
So we might make it lower if we think there's a higher risk or higher if we think not.
So there's a scale of materiality level that we're allowed to go down to.
And that then drives a acceptable window that we'll use to drive the methodology around
that.
but that's quite a specialist -led set of procedures that are quite routine across our methodology.
Just a follow -up on that, so if we invested much more in unlisted investments, that percentage
could rise quite considerably?
It could do, so the way in which we'll look at the split between level two and level three,
for example, is level three are non -observable in terms of the valuation, so they are trickier
value, so that might mean that we go down a more cautious route in testing those
efforts if this shift in terms of level two to level three proportions change
significantly, because there's a sort of inherent risk in that categorization
that's higher than if it were a level two or certainly a level one where the
valuation is more simplistic.
Thanks, I just want you to check the funding levels on, I note that a couple
of places you said the funding level had been going up, so 2019 I think it was 105%, 2022
116%, and then on page 825 if you just do the calculation it seems now to be about 136%,
is that correct?
I don't really want me to answer that one on the funding levels. I mean the past valuation
that had I think, you know, did come in at the 116.
That was after we took all,
we have an asset shock reserve,
so I haven't got the exact numbers right in front of me.
So the slight nuance that we do here
is that we put 10 % of the assets
into an asset shock reserve
so that if there was a black swan moment
that you have that sort of buffer.
And where that came beneficial really was during COVID
where there was those big drops.
and so some funds might have been having to review
and have a look at what would happen.
And bearing in mind we're coming into evaluation.
This is where that sort of thing would really, really
be prudent because what you don't want to have is
you know, setting evaluation at a time
where there's peaks and troughs and especially the trough.
So yes, I know it's a very long -winded way of saying
of saying our funding levels are not quite reduced in the same way as it might be for
other funds because we have that buffer.
If there are no more questions, then I'd like to thank you very much, Ben. We need to, as
a committee, note the draft report and the audit and approve the published statement
into the pension funds accounts and authorize me to sign the pension fund accounts and letter
of representation once the outstanding work is completed.
Are you all content?
Thank you very much.
Item 7, pension fund annual report.
Mr. Cholossi.
Okay, thank you.
So much of what you see in this annual review is stuff that you would already have seen
before, during the course of the year.
It outlines how we've delivered on performance,
whether it be investments and also in what our administrative teams
have been able to deliver on their key targets.
And it also sets out the funds accounts as well.
It is very long and I don't intend to really go into the detail
other than to throw it open to questions from yourselves.
Noting that I might defer to Coral
if it's for some of the accounting terms.
And I've got Martin Doyle who is the assistant director
for the pension shared service who should be online.
If there are any specific questions in relation to his team
and how they've operated in regards to the performance
of dealing with scheme members.
Councillor Kripte. Thanks. I suppose I've only got one point,
and it actually harps back, I think, to the funding level, which I just mentioned previously.
So on page 173 at the bottom, when you're talking about the overall position, you say,
on balance we estimate that the funding position is slightly weaker when compared on a consistent
basis 31 March 2022. Given the details in the accounts and those calculations that we
can make on page 85, I think that referred to earlier, it doesn't seem to be in a weaker
position. I just wondered why you felt the need to put that in.
So, sorry, going back to page 85, the table you're looking at in the accounts on page
85 is actually on a different basis. So that's the IAS 19 valuation, which is an incredibly
techie way of looking at it, but it ignores all the assumptions that the actuary comes
up in the triennial valuation that are specific to our fund, and it uses the assumptions that
required in the accounting standard, so it's less useful. It goes in the accounts because
it makes figures comparable across all pension funds everywhere and it's an international
reporting standard, so it is literally everywhere, but it's not as specific to the fund and the
actuary statement that you're looking at in the annual report is specific to the fund
and I believe it takes the March 22 valuation and rolls it forward.
So, in terms of the cash flows of a fund,
the actuaries statement is probably the one to focus on more,
but it is on the actuarial, triennial valuation basis
and not on the same basis as the IAS 19 one.
It is confusing to have two different valuation bases
used in the statement of accounts,
but we're required to report on the international standard as well as what our actuary is assessed.
And that's why you're getting differences because we're required to use different assumptions in some of the notes.
Sorry, that's quite technical. Is that clear?
That's fantastic.
Can you just point me then to where the relevant value is that I should have used to do the calculation in these two documents?
I think it will be in the table just after or just before the top of my head.
Sorry I'm on the other page in the accounts now. So we do put the
the triennial review is in there in the note before on page 83 and that is the
figures that you're used to seeing from the actuary in the triennial valuation.
There won't be figures that match the actuary statement in the annual report
because that's new for the annual report but in the accounts we published the
last triennial valuation which is by its nature slightly out of date at this
point and then the required accounting basis. So if you're looking for an
updated triennial that will be the actuary statement on page, I'm sorry the
page you were looking at in the annual report. Page 173 I think you said. So
that's that's the actuary's estimate without doing the detailed work of what
the triennial valuation would be if we did it today I think. So that value
on 173 is the value.
I mean, the valuation levels, I should say, really, when we set them, it's over every
three years. We're about to enter into the next one when we set our contribution rates.
They're not a science. I really would not get significantly bogged down with looking
at the interim and intermediate funding levels. For us, the biggest challenge that we face
is cash flow. We're a cash flow negative fund and therefore, you know, our investments are
geared up to ensure that we try to be a little bit more prudent in our approach when we're
looking at our investments to try to maintain that funding level. But again, any concerns
that you have, we've got that 10 % buffer. Secondly, we are one of the most well -funded
in the country. So funding level is not a key issue for us. We're quite fortunate in
the position that we've had. We've had very much of a growth approach. I think when we're
talking about growth and we look at the performance paper later on, when we come around to that
agenda, asset allocation review, we might want to think about changing some of those
styles going forward because of the position we are in our funding level and not to expose
ourselves to as much risk which might potentially be detrimental to that
situation.
Thank you Mr. Gelotti. Is that a question Mr. Councillor Cassell?
Yeah, I may be in the wrong paper but there's so many papers but I read somewhere that our
equities are not performing as well as we'd like and we searched on it really
quickly in the training and I didn't understand the response so this may not
be the right time to ask but can I at some time ask about the equities? Yeah I
I think that's on the next paper, I think,
Agenda ISM when we talk about the performance
of the underlying managers.
Yeah, next time.
So can I just ask the committee if you are happy
to approve the publication of this report?
Yep, thank you very much indeed.
So we're now on to, we've got another seven minutes,
We are on to the quarterly investment performance report, item 8.
Mr Jod, if you could introduce this report.
This is a standard item that you see at each cycle.
overall, you know, this obviously details the overall performance of the fund and also
that of the underlying managers. Overall, this quarter, the fund is not delivering where
ideally we would like it to be. Longer term, you know, we have actually had some good general
performance because if you look in paragraph 3, the one -year performance to date, the ones
the fund has achieved a 12 .8 % return
against the local authority average of 11 .1.
That would imply that we are doing extremely well,
but if you then compare it to how well
we should have delivered, if our fund managers
were meeting their benchmark allocations,
it would be 15%.
That means in a way,
if we really want to get into the granular details,
that the strategies that we are coming up with
are certainly have been the right ones when compared to our peer group. But some of the
managers that we have through the London SIV have not necessarily met the levels which
we would expect them to do had they met their customised benchmark. So I will leave it as
that.
So I think one of the things that just jumps out at this for me is the difference between
the passive and the active mandates.
And as Mr. Gelotti has explained to me,
there's actually a 30 basis point difference,
i .3 of a percent in terms of the costs
that the active mandates,
which are being run by highly paid fund managers
versus the passive mandates,
which are being run by AI, largely.
So it's more expensive.
That amounts to 30 ,000 pounds a year in costs,
just right there.
and if there's a difference in performance as well on top of that in bad years,
then we would have been in this last year a lot better off if we'd been in passive mandates,
if I've understood correctly. So I just wanted to ask Mr Gelotti to clarify what the officer's
stance is on the difference between passive and active and how we might go forwards to
take more advantage of a passive stance.
There will be a Ca C
.
This will be a decision for what members will want to
consider. It is part of a risk appetite.
Clearly, with a passive, you follow the benchmark. You're
If you invest in a global equity passive mandate,
the return that you should get would be that
of the benchmark.
Whereas if you take an active approach,
you're hoping that the highly skilled individuals
who we are paying substantial sums of money for,
will rather than have to invest in the weighted average
of a lower performing stock,
will actually invest more in those
that they think will actually outperform.
historically, active management has delivered well for the fund. Part of the reason we are
in the positive funding level position is that we have actually had good excess returns
through those managers. In more recent times, that has not been the case. They have not
been delivering. That could be for several reasons. That could be linked to A, the quality
and the skill set of the individuals,
managers in their skills to pick underlying shares.
But it could also be the style bias
of any particular approach that we make,
whether it's value, whether it's growth,
whether or not it's something slightly different.
We have had responsible investments.
We've had ESG approaches and tilts towards our managers.
because those funds have not been delivered as well
as those that don't have some of that style.
So RBC, which is thinking is the sustainable equity manager,
you'll see in there as well, looking at their performance.
So that's the range of things.
So when we come around to doing our asset allocation review,
which will come next year,
one of the considerations that you need to consider
if you wish to continue with an active approach
or switch to a passive.
Councillor Dickerton.
Yeah, so just on the ESG question.
So because the passive funds are linked to the benchmarking,
you're saying that there's, in terms of their portfolios,
they're just much more tied to non -ESG -based market trends,
right?
So is it that our current policy means that we,
in order to meet our ESG requirements,
we have a good spread because we still manage
to compare ourselves well to other councils?
And would that go against our,
if we move more towards passive,
would that go against our long -term strategy
in terms of our divestment?
Not necessarily.
Invest we have is through the future world.
and that became a private sector fund mandate.
emergency.
So it's in line with our strategy anyway?
Yes. Okay.
I think just to clarify, I mean,
BR Dill
simply means, you take an index, and that index can be as narrow
or as broad as you like, you can have a world index fund
that just covers all listed equities across the world
and try to mimic that.
Or you can have a very ethical North American fund,
but you just decide which of the companies in that
and then you don't make any investment decisions,
you just track that.
So it's extremely tailorable,
it's simply whether or not you're paying somebody
to make decisions as to whether Nestle is going to do better than Unilever this
year and invest accordingly or a computer program is just going to say
you've got a hundred shares you can invest in try to mimic the performance
of these thousand shares. It's slightly terrifying that we're I mean we're just
it's fairly clear that the AI is performing a lot better than real people.
I mean, is that the norm that we're seeing across most of the...
Councillor Craig, you've got a professional point of view on this.
Well, yeah, I think as Mr. English, you might like to chime in in a second.
I think for some context, to keep it kind of non -technical language,
the dumber your money's been invested for the last two or three years,
the better it's done.
So, if you've just had market cap weighted, you've invested in the biggest companies,
Apple, Nvidia, they've just gotten bigger and bigger and bigger.
Almost all active managers take a, arguably, lower risk approach than that and don't overweight.
At the moment, if you put a global equity tracker onto the books, you'll end up holding
something like 6 or 7 % alone in Apple, which actually is arguably outside of normal risk
tolerance because you've got such a concentration in North American technology stocks.
So, active managers have actually been arguably lower
risk than some of the passive stuff is now because it's so
overweight North American tech.
But unfortunately, that has penalized performance against
benchmarks that are largely passive.
So, it's more the benchmarks gone whoosh than our fund
managers have gone badly, though Bailey Gifford has had a
toll with time, to be honest.
They have done just badly.
So, yeah.
And that's the big seven that Mercer mentioned in the meeting
before, the seven big tech companies that are basically
charging the market.
Councillor Caddy.
But presumably it's not just a choice between active or passive, we could change the active
managers, that's another option. Or not because we're in the London SIV.
You answered the question for me. There are different managers on the SIV.
Is non -performance a way of getting out of it? Are we able to say, well, we're unhappy
with the performance, therefore we want to choose someone else?
We're not alone in trying to say to the SIF that we need to engage with those
managers. Those managers that are on the platform are still highly rated by not
only the SIF but by also our investment consultant. So Tony, you want to
pass comment necessarily on some of the ones that we've got on like Beatty
for example.
Thank you, officer.
So there's probably a limit to what I can say in the public meeting on Mercer's ratings, but just some comments I'd make on
active management more broadly.
You know, effectively all investors
in aggregate
defines the market. So your starting point should be that actually investors in aggregate will return the market return, i .e.
active management is effectively a zero -sum game, you could argue.
But so really the question is, do you think you've identified a manager who can outperform other investors? Because for every
stock that you buy that wins, the person you bought off is lost effectively.
So it's kind of that they offset. So that's one of the questions you need to ask. Or is it a market that you think there's some
participants in that market who aren't actually seeking profit.
So some people would argue some central banks, for example,
might create opportunities in currencies.
But effectively this comes out of investment beliefs.
So it may be something to consider for the committee to
actually review their investment beliefs.
Just the only other point I'd say just generically is of
course some of your assets you cannot manage passively.
So your property, your infrastructure, you can't manage those assets passively.
A private debt, you can't manage passively.
So this is more we're talking about the equity, the listed assets, the equities and the bonds.
And the other thing I'd caution is that actually, whilst we say passive, passive used to mean
a buy and hold strategy, but particularly as people look into embed climate transition
objectives, net zero objectives where you've
actually got target decarbonization, that
means the benchmark actually has to turn over
to meet those objectives.
You're actually selecting what I would define as a
quantitative investment strategy.
So, it's not actually necessarily as simple as
you might think.
Passive used to be something that's simple to
choose, low cost.
It's definitely still low cost, passive, much more
low cost, but it's not as simple perhaps to choose
because effectively you've got to choose a
quantitative process that meets your objectives,
which will be investment objectives, climate
objectives, ESG objectives, etc.
I mean, I think to summarise, we do need to
keep an eye on this.
Obviously, our officers and our advisors are doing
exactly that.
We are deliberately not an agile fund.
We don't hop in and out of different investment
strategies.
We have quite a slow process of when we change
investment allocations and that's coming up in a year's time.
So this is not something to act on today and I don't think it would be right for us to
be switching simply on one quarter's results.
But we are going to be keeping an eye on this.
And so with the Committee's approval, I'd just like to ask the officers to continue
to report back to us on this and to continue to advise us, but to feed this into the next
allocation review, which will be coming up in –
the trineal valuation which will be at the end of 31st of March 2025. Once we've got
the results we'll then engage Mercer to work with us on it. So it'll be during the course
of the next financial year.
Right, so coming up very, very quickly. Councillor Craigie.
A separate question to that on this paper if I may. Mr. Giuliani, I note the two infrastructure
funds, Octopus and Sandbook, recently on are selected. When are we going to have deployed
When are they going to have deployed the capital we've given, so we'll start seeing the investment
come back on that?
Some of it's already deployed.
As you will be aware, the investment period for these types of funds are quite long, and
it'd be even longer for Octopus when we were the cornerstone investor.
So when we invested, we were the only one.
We had put 40 million in, so they would not have been looking to deploy all of that.
Otherwise it would be a very highly concentrated portfolio.
So the investment periods for Sandbrook has certainly expired.
I think they still are looking to raise more revenue, sorry, more capital rather, for Octopus.
So I think the Octopus fund will take still quite a while longer before they'll be deployed.
Sandbrook I would hope would be ramping up now that they've got the full amount of money that they require.
But some of our private debt funds were still deploying.
And that sort of period, it's not unusual for it to be three to four years before you
can actually have all your money deployed.
Just a couple of technical things we are asked to note.
Firstly, I think we've noted the investment performance, but we also need to note that
the Global Focus Fund is above 15 % of the fund and cash is also above the higher benchmark
threshold.
But I believe those are not matters of concern to the officers.
Not particularly, I think, in the other paper when we're given an update on bonds, et cetera,
or explaining some of the things that we're doing to rebalance those sort of issues.
But clearly, when we are looking at what we do with our equity portfolio next year, the
overweight with the Global Focus Fund will be something that we would want to look at.
And finally, would the committee be amenable for Mr Gelotti to circulate some ideas as
to which managers we'd like to attend the next meeting and we'll pass those around and
just get a feedback from the committee as to who you'd like to see rather than debating
that this evening. Has anybody got a strong view on a particular manager they'd like to
come, that they'd like to mention now or can we leave that to a later point?
If we are happy with all that, let's move on to Item 9, General Matters, including training.
If I take this in segments, because obviously they are sort of discrete items, and then
if members have any particular questions on it, I'll either be myself or I'll direct it
to other individuals to answer.
So first thing is in relation to the pooling and our bonds.
I think as we've mentioned here before,
the direction that we've been obliged to going
is to put more of our liquid assets into the pool.
And this is on, you know, what we've brought to members
and the SIV come and present was the buy and hold
called All Maturities Mandate for Bonds.
We're pleased to say that that now has been completed.
When we came, we said that we would be looking to exit
all three of our existing managers,
subject to due diligence on the transition and costs.
But what we found was to move the money in legal and general
which is in a passive approach,
A, costs would go up,
and B, the transactional costs were quite large really for moving, you know, £41 million
worth of assets. So in consultation with the Chair and the Vice Chair, we elected not to
move them. They are pool compliant because they are overseen by the pools, so we would,
you know, those figures still can be included in those numbers that we report. And secondly,
we were slightly underweight, so we've used some of the cash in order to top up that investment.
So before I move on to the next section, is there any questions on that part?
Nope, okay. So next we can talk about one of the property managers. Again,
it's been here to this committee both in public and in private session
about some of the challenges that we've got.
As has been previously mentioned, the fund is at a stage because of some redemptions that it would have been wound up.
We didn't think it was in our financial interest for that to happen, so you'd
asked us to go away and try to see if we could find an alternative including
somebody else procuring those assets and that has been done. The first vote has
taken place and the results were reported back to this committee. We're
now coming into the final sort of stages with the technical aspects being
conducted between Naveen and the preferred manager. That is now coming to
fruition. In addition to the work that's gone on in relation to the two
managers, I've been working alongside co -investors. You'll note that the
best offer was 99 % of NAV, so to try and compensate for, shall we say, a 1 % loss,
which is still much better than it would have been
if we had to exit.
I've negotiated an arrangement
where we will be a strategic partner of another pool.
That would enable us to get preferential fee rates.
But all of this is still subject to final due diligence,
at which point, assuming that all of the legals
and the go -ahead is committed between the two funds,
We will engage with MRSA just to get their view on the fund.
They know the fund well, but as with all of these cases,
until we put the request in and we get the formal report from them,
we won't obviously sign on the dotted line.
But I think you delegated to myself to do the previous negotiations
and I think one of the recommendations in this paper is that I am delegated
to obviously push ahead with this if it's in our financial interest to do so.
But if there's any questions, I'll happily take them.
So the next point is, okay I'll be very brief, bearing in mind we've only got three
minutes before we're supposed to go into the closed session. So the GAD, which is
basically the national approach to auditing, so it's a global
sort of standards for which they're looking at it.
So when they do their section 13 report, we talked about
assumptions, we talked about funding levels.
All of those are based on our own individual actuary,
determining and setting those parameters.
When GAD getting involved in it, they use a common set,
and that is what was carried out in their review.
They also score the fund and if there are any issues,
we'll raise red flags.
All of the reports that we got from them came out
as though we were green and obviously showing
that we are extremely well funded in relation to that.
The details of the report and the review
is attached as appendix A.
Councillor Gasser and Councillor Kirk take after that.
Could you just explain to me, I don't understand why the Gantt figures are different to our
own figures. Are they looking at different things?
They use different assumptions. So they will have different, technically different discount
rates, they'll have different mortality rates, they'll have different investment return rates.
So in reality we don't really use it because they're not bespoke to our fund, they don't
really show anything. If they highlighted some red flags, then I would be potentially
concerned depending upon what was being said. But you'll see from the report, we got green
throughout.
Councillor Crooktake.
Hello. Just going back, I suppose, to this point that we are actually very, very well
funded and I think that was confirmed, wasn't it, in, as you say, Appendix A, and that sort
of matches the percentages that we talked about earlier. So these are actuarial values,
aren't they, including all the actuarial assumptions that you spoke about earlier on?
They are, but they're not ours. So the assumptions that are used are not set by us. They're set
by a common set, whereas our actuary will set them
based on our investment strategy,
and set them based on our underlying scheme membership
when looking at the liabilities.
So they are common.
You'll note that the funding level using the GADS scheme
which shows us even another number,
and that's why I don't like using numbers
because it's another one to confuse you,
that's saying 138 .7.
But using the same assumptions,
what they're saying is over the three year period,
using their levels, it's increased by 6 .5%.
That's the only thing I'll show you.
That shows our funding levels using those
on a common thread is going up in line in a positive way.
Sometimes the reasons why people sometimes like them
is it stops, shall we say, certain funds or actuaries
using certain techniques to either inflate
or deflate any particular level.
Any further questions? If we then move on to the approval for the
discretion's policy, I will be again very, very brief on this to say that I've got Martin
on line if there's any particular questions, but there are no real changes to it. This
is really just tidying up because job titles have changed, directors are now executive
directors, assistant directors are now directors, so it was making sure that we
just reflected those changes and I think one post in those rounds has been
deleted, so it's finding an alternative. So there's nothing of substance, it
purely is titles and who is accountable and responsible. So in the last couple of
I will let Coral provide a verbal update.
The pensions administration IT system is going to be discussed in more detail in the private
session, but namely your note that we are recommending to renew the licences to Haywoods
for eight years.
And then finally, we have talked in detail already earlier with regards to the petition,
the scheme advisory guidance on fiduciary duty and dealing with lobbying.
I don't intend to talk any more on that.
You've got the appendix there and we've discussed in detail the implications of what you can
and what you can't do.
So I will pass over to Coral to give a very brief update on member training.
I'll just say thank you to the Councillors who have given me the evidence that they have
completed the training so far and just a reminder that you now need to complete a self -assessment
form.
sorry I know it feels never -ending but thank you very much for handing over the
evidence.
Yes and your self -assessment councillor Dickerton, thank you. Thank you. So we just
need to note these updates and we need to delegate authority to Mr. Gelosi to
vote on the nouveen UK PF merger if a vote is required before the next meeting of this
committee and we need to approve the revised discretion policy updating job titles.
Everybody happy with that?
Thank you very much indeed.
Tragically we're three minutes late.
We now are going to move into the closed session.
So I'm going to ask you to agree that under section 100A4 of the Local Government Act
1972, members of the public and press should be excluded from the meeting while items 11
and 12 are being considered, because it is likely that exempt information as described
in paragraph 3 of part 1 of schedule 12A to the Act would be disclosed to them if they
were present.
And it is considered that in all the circumstances of the case, the public interest in maintaining
the exemption outweighs the public interest in disclosing the information.
Is that agreed?
Thank you very much.
If I could therefore ask the officers to make the necessary arrangements and let me know
when that's done.