Joint Pensions Committee - Tuesday 10 June 2025, 7:15pm - Wandsworth Council Webcasting

Joint Pensions Committee
Tuesday, 10th June 2025 at 7:15pm 

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Good evening, everybody, and welcome to this meeting of the Wansworth and Richmond Joint
Pension Committee.
members of the committee I will now call your names in alphabetical order
Councillor Caddy good evening Councillor Craigie good evening
Councillor Crookdale, Councillor Dickardam present
Good evening.
Councillor Gasser.
Yes, good evening.
Councillor Ireland.
Good evening.
Councillor Pridham.
Good evening.
We do have a number of officers present who will introduce themselves when they address
the committee.
So first item, minutes.
Have we agreed on the previous minutes?
Thank you.
Are there, sort of, a disclosable pecuniary interest?
Does anybody have any disclosable pecuniary interest to reveal?
Thank you.
So item three, minutes of the local pension board.
May we note those for information?
Thank you.
And so the pension fund audit plan.
Mr. Chilotti, please let us hear about that.
Okay, thank you chair. I won't speak for long because we've got and from external authors here to go into detail
About their specific plan, but this is just that the routine audit that will be carried out
In light of setting out the agenda for what they'd be proposing to do over the course of the year
It outlines the fact that there's probably limited real changing the risk sort of profiles
with regards to how we've actually delivered and what we are expected to carry out.
Clearly there are assets within our portfolio that can be more challenging in order to provide
values due to the way that they are traded and no doubt EY will explain in more detail
around how the process is that they will be seeking to carry out the audit in regards
to our accounts.
So I will pass you over to Amna to go through in more detail.
Hi, I'm Amna Arooj and I'm the audit manager on Wonsford Pension Fund and investment council
and Wonsford Council.
And this is my second year as an audit manager on both councils and pension fund.
I just ask you to move your mouth a little bit closer to the microphone.
You need to, so that we can all hear you and the people listening in.
Yes, you need to be a bit of a rock star about this and get your face right up on the microphone.
Sorry about that.
Thank you.
Okay.
So I'm just here to present our 24 -25 audit plan and just to feedback on how 23 -24 audit
goes.
So on 23 -24 audit we met the backstop date of 28 February 2025.
So thanks to Coral and her team who provides all the information timely and be able to
meet that deadline and also to the council team because pension fund accounts are signed
with the Fonzforth Council accounts.
And we are hoping that, so the backstop date for 24 -25 is also in February, it's 26 February 2026,
and we are hoping that we will complete all our planned procedure for pension fund as well,
and we'll meet the deadline this time as well.
So we are not taking any risk here, so we are hoping that we'll meet the deadline.
So, second is if I can just overview on the risk. So, the risk, we haven't, there isn't any change in
our risk from prior year. So, our risks are same. So, if you talk about, so the first risk is always
on the fraud. So, our fraud risk is around the management override of control and we just took
in a very specific circumstances on how it impact the pension fund because pension fund operations are different from councils or from companies.
And from the pension fund point of view, we think that the fraud risk is on the investment income side.
So this is our first risk and our second risk on the significant risk on, as Paul mentioned, on hard to value assets which are categorized as level 3.
for those assets because the quoted price or the quoted price of the similar securities are not available generally.
So that's our hard to value. So this is our more focused area of risk and this requires a special consideration.
And this is the similar risk that we have from past three or four years.
Our second risk, third risk is on value of level two investments.
So for level two investments, there is less complexity involved in valuing the investment
because the quoted price is available but considering the amount of the level two investment
because it's 90 % of the fund portfolio, so we consider it still risky, inherently risky
from our audit point of view.
And fourth one is IAS 26 disclosure which is also the inherent risk and not required
any special consideration but still inherently risk it due to the complexity involved in
the disclosures.
The other main thing is the materiality.
So our materiality levels are – so our basis of materiality is similar, which is the fund
assets.
And from our planning point of view, we based our materiality based on the prior year accounts.
So – and we just reassess it based on 24, 25 accounts.
So just by looking at the numbers, our planning materiality was 30 .8 million.
And looking at 24, 25 accounts, it will be around 31 .6 million.
So it hasn't been significantly changed.
And our performance materiality is 75 percent of the planning materiality.
So performance materiality is the reduced level of materiality that we use to carry
out the audit procedures.
and our order difference level is 1 .5 million.
So this is a threshold where we are required
to communicate to you any uncorrected misstatement
by the management.
So do you have any question at this point?
Can I, no?
So I'll just briefly explain what our procedures are
in terms of the risk that I have mentioned.
So for first one, like the investment income risk,
so we have some mandatory procedures
that are required by ISA 240, which is the general entry
testing and looking at management estimates
and assessing the management estimates.
So we will carry out all those procedures.
Other than that, we will understand the fraud
environment and how you oversee the activities on the pension
fund.
and we will do so by writing a letter to the chair of the committee
and inquiring them about the process, about any instances of fraud
and come back. So that's our general procedures on fraud.
And on the investment testing, so I will explain level 3 and level 2 testing at 1.
So what's the only, we have changed our approach from 23 -24.
So what we have done in 2024 -25 is we have engaged EWA specialist center of excellence team for the testing of investment asset because they are specialized in the financial services sector and they have more data set available for testing the assets.
but they will be just assisting the audit team, the ultimate responsibility of the procedures,
results and concluding rest with me and then the audit partner.
But they are helping out in providing us more information and more accurate information
on the investment, on the investment assets valuation.
So on the investment asset valuation we will obtain the investment fund managers report,
We will check their basis of valuation and we will corroborate their valuation with the
other independent sources available on the market and we compare and challenge those
if there are significant differences from what we are seeing in the market conditions
or what we are seeing in the investment valuation.
So that's how we test the level 3 and level 2 assets.
Level 2 assets are quite straightforward because we can easily get the quoted market price
from EY dataset, but level three are quite tricky.
So any questions on the –
Yes, if I may.
Just bearing in mind that these proceedings are televised and members of the public and
interested parties watch, I think it would be just helpful if you could set out this
30 million materiality threshold, although it's a very, very small fraction of a very
a much larger number, but nevertheless, 30 million sounds
like a lot of money.
And I think it would just be helpful to explain,
for our benefit, but also particularly as we're
asked to approve these levels, how it is that a 30 million
pound discrepancy might arise, particularly in a way that
doesn't involve fraud, because I think that's what jumps
into people's minds when they think of, well, there's 30
million pounds missing somewhere.
Has it been put into somebody's pocket?
Could you just explain that in layman's terms for us?
Yes, so it could be because that 30 million is based on the 3 billion asset portfolio.
So our basis is that the asset valuation is what is relevant for the users of financial statement
or the users are more interested in like what's the value of the fund.
So 30 million is maybe if not fraud, it may be like if we identify a difference in the valuation.
For example, in the pension fund accounts, there are investments which are overvalued by 30 million
and our testing says that the value should be this one and we have the difference of 30 million.
So that's where the difference becomes material to the users of financial statement and that's
where we need to report it and that's the impact of 30 million that goes to our audit
report directly.
So these are different points of view on the value of things at different points in time
rather than necessarily fraudulent actions.
And when it comes to these hard to value assets, again in layman's terms this is not dissimilar
to thinking about your own house, which is a similarly hard to value asset.
It doesn't mean it's a risky asset.
It just means you can't look up its exact precise value online at any given moment.
Would that be correct?
Yes, because if you look about the funds value asset, these are pooled property or infrastructure
assets and the value of those assets is not directly available on any listed market.
So these are valued differently than the level two assets which are available on the quoted market or the listed price.
So yes, these are not like inherently risky, but the valuations technique of those assets make them significant risk for us.
Thank you. I think that's reassuring.
Councillor Sarah, I think you had a question and then Councillor Caddy.
Thank you, Chair.
Just following on from your point there,
is there anything in the mandate
to look at ways of mitigating those risks
that have been identified?
I mean, obviously the key risk really
is gonna be on people's judgment on valuations,
and I think that's always going to be difficult.
If you've got two RICs architects going out
and doing things, you've got two quantity surveyors going out and doing it.
I mean, you get two state agents going around and valuing the property.
You're clearly going to get two different elements.
And I think that's the context of what we're looking here.
Obviously, there are three main strands we've got of sort of that sort of like tier three
type investments.
You've got your infrastructure, you've got your property, and you've also got within
private markets as well, we've got private debt.
Private debt though, we know what we're going to get unless there's a default because, you
So the real element really on it is solely really going to be property and infrastructure.
And in the scheme of things we've got roughly around about 10 % of our assets in its entirety
of our fund value, so up to about 300 million committed.
So the likelihood of us breaching that 30 million is low, and I think that's how you
can manage some of those risks.
But you're never going to eradicate them because, as Anne has explained, it's not like equity
where you can just go online and you can see a daily price market.
You know, it's only worth what someone's willing to pay for it at the point in time you're willing to sell it.
Now clearly those values are not just the judgement of the individual manager,
they're independently audited and those managers are regulated by their professional body.
So that is where I'd say our risk management process is going in,
is making sure that the managers are appropriately qualified and experienced
to actually go into those transactions on those calculated prices which in fact
are probably present value or future cash flows that's how any of these
things are going to end up being valued and there's always going to be a
difference of view and judgment call on what that price is on any one given time
and we only know who is right at the point in time when you need to sell that
asset.
And then, I guess, the following question is, it talks about risk around the estimation
process, data use and assumptions used by the actuary.
So what work is done to sort of assess that risk and decide whether the disclosures are
correct?
So I think, Councillor, I should answer on what has actually gone into the accounts.
The valuation for 2025, we are still working on it, so none of that data will have been
used in the reporting for the accounts.
What we do do for EIS 26 is we give updated cash flows to the end of March, asset valuations
to the end of March, and we do give fund membership data as at the end of March as well, but it's
not a direct – some of that data will also be used in the valuation, but we don't have
a valuation data set to use as yet.
But presumably by the time the accounts are signed off, that would be available.
So would the auditors look at that kind of information, post balance sheet?
I mean if there is the option to do a post balance sheet event if it is significant material
and it would change the understanding of the accounts at the 31st of March, but I wouldn't
think we would normally need to do that on IAS 26 because we are using the same data
that will be used in the valuation.
And IAS 26 uses its own set of assumptions.
It's like IAS 19.
So it's not the same assumptions that go into the evaluation.
And if you've got the same data set used for both
and the specific assumptions, they might find an error in it.
But it's unlikely that we would need to restate anything.
If I can just add on the other question on the risk.
So some of the risks are like mandatory to add so we can't mitigate it
So for example the fraud risk this is what required by ISA 240
So even if you don't have any other risk, the fraud risk would still be there. So I just wanted to add that
Thank you very much if there are no more questions are we happy with these levels of materiality and
and approve this plan.
Sorry, Councillor Arland, thank you.
I think it's page 45 where you're talking about the, 43, we're talking about the fees
and you're saying that for next year you'll be testing membership data.
Is that standard practice or is that unusual?
No, we just caveat it with the note that we will only be charging it if we end up doing
any membership testing.
Like if the triennial valuation report is finalized, which we are not expecting it will
be.
So we will just add it and caveat it with the note.
Thank you.
So thank you.
I think I was getting a nod there on the overall approval.
Yep.
Thank you very much.
So, we are now on to item 5, which is the road map to valuation 2025.
Mr. Gelotti.
Thank you, Chair.
That last question leads nicely on to this and it sort of semi -explains some of the part
of the process.
So, it is routine, but it is not annual.
So, as the title explains, the training evaluation, so every three years the fund will submit
all of its data sets through to our actuary which is Barnet Waddingham and
they will obviously look at the the calculations within that to try to
ascertain what the liabilities of the fund are and then that's married up with
the asset values to determine whether or not we're in surplus or in deficit and
similarly that will help shape what the contribution rates will be for the fund
going forward for the next three years that will kick in from the 1st of April 2026.
So this is just really a paper just for an early sight to forewarn you of what's likely to be
coming in the next few meetings. There'll be a lot more data that will be coming in and trying to help
shape where we're going to go for the future. It would also be used to help when we come to doing
our asset allocation review where we'll get Mercer to look at our components and when we can talk
about fit for the future and the future direction of how the fund will operate
in the new world with the pension scheme bill and the role that the London
Civil have in it. No doubt we'll be engaging with them throughout the
process once we've actually got those indicative results. So we will be
anticipating that around sort of October time we'll have early indications of
where we are likely to be and then we'll set you know that will then be used to
work with yourselves around what we do for our just as I mentioned the asset
allocation review so currently at the moment there's nothing really for for
you to be concerned or worried about or any particular questions but I thought
it would just be good so you see the roadmap as to where we are so you can
see what we're planning on doing so that if there is anything specific that you
want it to be brought here you know when it's likely to come and you can ask in
advance if there's any particular questions so I'll pause for there to see
if there's anything at the moment that you may have in what we're planning on
doing
I'm Councillor caddy yep I'm just a quick one can you just confirm the
valuation date for this will be the end of March 25 just passed? Yes so we use
the 31st of March 2025 data set but there's a smoothing mechanism so it'll
be explaining more detail when the actuary comes and we'll go through their
process but we don't just use what the value of the assets were on any one
given day it's smoothed out otherwise you could easily have a snapshot moment
that could give a spike or an adverse effect on what would be.
So they smooth it out over a period in order to do it.
But it is actually the data set as at the 31st of March 2025.
On page 59 there's reference to the 10 % asset shock reserve.
Can you just remind us what that is for and what it means and what kind of knock -on effect
it has on the numbers?
Yes, certainly.
So I think the last valuation we reported, 116 % funding level.
But if you actually looked at what the total value of our assets divided by the liabilities,
it would have actually come in at 126.
What we've done is in order to make sure that we're prudent and we're in a privileged position
because we've got our funding level to the position that it currently is, is that rather
than having a potential shock because of market reactions and we've had a few
issues whether it be the Ukraine, whether it be COVID, whether it be certain
budgets that have had spikes in markets, it meant that the fund would be
protected. One of the most important things for employers is to have a stable
contribution rate and what we don't want to have is big spikes up and down and
variations in it so this is a prudence mechanism to try to help smooth out that
contribution rate. So if we were to have an adverse impact in the fund, we could potentially
draw down on that reserve rather than going back to employers in a short period of time
and asking them to have to pay a higher contribution rate. So it's a risk management tool to help
smooth out contribution rates.
Thank you. And then the following question is, is there any particular reason why it's
10 % rather than 8 % or 12 % or 5 % and would that have a big impact on employer contributions?
It would have an impact on employer contributions because clearly not so much on the primary
rate which is the standard but on the secondary rate obviously if we've got more that we can
give back to individuals you can have a negative secondary rate.
The ability to do that is reduced if we are having a higher asset shock reserve because actually the numbers that we would be playing with are much lower.
The reason for 10 % is it's what seemed to be practical and prudent to try to balance out that contribution rate on a longer term basis.
We could be more aggressive, we could give money back sooner rather than later but that means that money would run out very quickly
and if there was any adverse impact you'd end up having to pay more.
So this is more about trying to have a steady and smooth transition on any changes that
are made to contributions over that longer period because this fund is likely to be here
for another 60, 70, 80 years and what we don't want to do is have contribution rates that
go up and down.
I think it's probably, elaborate in a bit more detail,
I'm probably going into something slightly
on a different tangent about funding levels
and how they're calculated.
And we'll go into more detail
when the actuary comes and presents.
But there are two completely different distinct methods
of actually calculating what your funding level
and what your discount rate in particular will be.
You've got GILTS plus and then you've got
sort of weighted average return minus.
So, Barnet's approach is they'll actually work out what their predicted returns are
from our asset allocations, our 55 % to equity, etc.
And they will work out what they think is the longer term performance and then they'll
take off a prudence rate and that will give you that discount rate which is then used
to calculate funding levels and contribution rates.
The other mechanism is GILTS Plus.
So they'll use things like the 30 -year guilt rate and then add an element to it.
The challenge we've got now is you'll be seeing in the press a lot of people are saying,
although expecting funding levels to shoot up heavily, that's not going to be on our method.
That's methods where they use guilt plus because three years ago base rates were very, very low.
And therefore their discount rates were substantially lower and they are now going to shoot up.
So five and a half to six percent potentially for some of them, whereas there might have been three and a half, four percent before.
Ours is a lot more stable, which means that you get less volatility.
It does mean though that when you're looking at what our likely funding level will be compared to three years ago,
ours is likely to be relatively stable, whereas others when you're seeing it in the press and seeing others,
they're shot up by XYZ, that's why you're going to see a bigger differential this time than you probably have in many, many years,
because interest rates since 2008 have been pretty much flat and low and in the
last few years they've shot up. So I'll give you early warning that our funding
level is not likely to change substantially whereas others might be
going up 20, 30, 40 percent. Their performance is no better than ours. In
fact if you look over when we come on to the performance paper you'll see in the
last three years our annualised performance return is 4 .4 versus our
group average of 3 .7. Although all the other funds that are using some of the other actuaries,
their funding level might be going up substantially more than ours, which gives you the false
impression that they've actually performed better than us over the last three years.
They haven't. It's just the way that the funding levels are calculated.
Can I come back very quickly? My obvious next question then, I guess, is does that mean
that 10 % is too much because is 10 % a kind of industry standard? Is that what other funds
would be applying? And who gets to decide the 10 % asset shock level? Is it this committee
or is it the actuary or who decides it?
So other funds have not been in the privileged position to have an asset shock reserve previously.
They have because when they were calculating their funding levels when the discount rates
were very low, they didn't have the surplus that we had. So we haven't really got a peer
group to compare ourselves to because I think we're one of only two or three
that have had that in the past. The 10 % was delivered and dealt with primarily
through the actuary working with myself with a risk -based approach you know
looking at it from from that aspect on it so it is one of those areas where we
take the advice of the actuary who the qualified and experienced individuals to
to work with it, but their aim is to bear in mind that trying to deliver that long -term
stable contribution rate.
And it's a phrase that you'll get bored to death of me saying, because that's what I'll
be reiterating time and time again, because I think that's one of the most important things
to build in long -term financial planning.
If there are no more questions, can I take it that we can approve that?
Fantastic.
Okay, we now move on to general matters.
Okay, so I think in general normally when we've done this,
we've done it in bits rather than me talking
about everything, so if it's okay with the committee again,
I'll just talk in the various different segments.
So we can start off obviously with the future of pooling
and some of the questions you may have,
maybe of our colleagues over in the London CIF
who are with us today as well,
so that they may be better placed to answer some of your questions.
But you'll know that pooling has been around for a considerable period of time.
The London SIF in fact were the first ever pooled, I think back in 2015.
And since then legislation has grown and developed into where we are now, with the current government
setting out their Fit for the Future proposals, which have just been published and will be
set to be put into legislation over the next few months.
The consultation response you can see attached as Appendix A.
If I'm honest with you, the Government didn't really pay too much attention to some of the
comments.
I'll be tactful in how I say this.
And because despite the fact there's several areas whereby there are overwhelming views
that things should be changed, there's little change that has been made.
So you can see the direction of where we're going.
What it means is that all of our assets will need to be under the management of the London
CIV by the end of this financial year.
We're in a very strong position realistically because of two reasons.
One is that we've already transitioned the majority of our liquid assets either into
directly managed or dotted line like our passive which is pool compliant.
There is only actually one of those assets where we still need to work and engage with
the SIF to work out what we need to do and that is Oak Hill who are part of one of our
multi -asset credit managers.
That's probably the outlier at the moment because the private markets areas which would
be very difficult to transition across. The SIV have got a very pragmatic
solution in order to do it so we'll end up having a, they'll be overseeing it,
we'll end up having to sign a letter of agreement so they can directly manage
it but it won't mean us having to sell out and try and you know sell assets
that are very difficult to sell so I think it's really sensible and you know
pragmatic the Dean CEO has laid out proposals which have obviously been
endorsed by the government unlike unfortunately two of the pools who were
no longer be in existence so there might be some implications for us there we
don't know obviously where those you know the the underlying funds of those
two pools will go that may have implications for London CIV if we're
seeking to expand. I think it might be a bit difficult for us in some sense, we've
already got 32 funds. Adding some more might be some challenges but my
personal view and I would say to this committee is that if we were to be
approached and the CIV thought it was a good proposition we should embrace that
and look with it on a case -by -case basis rather than have any preconceived ideas.
So I'll stop there on pooling and see whether you have any questions of me or the CIF on
that particular aspect of this paper.
Councillor Gasser.
Yes, a few I'm afraid.
I haven't quite understood yet the relationship that our fund investment policy has with the
new pooling arrangements.
Do we still have the autonomy to say to tell the CIF how we want our fund invested?
I haven't quite understood that.
Do you want me to answer that one?
Yes, sure.
I'll do one at a time because some of them might be a bit more detailed and I'll throw
it open to the CIF so they might have some comments on it as well.
Unfortunately there's not a black or white answer to that one.
It is grey.
The reason for it being is that within the Fit for the Future proposals, core line objectives
i .e. what level of return, yield and etc. that firmly remains with this committee.
Setting a responsible investment policy lies with this committee.
The implementation of those though will be with the pool.
How much and how much detail is subject to interpretation?
Certainly if you're looking at it the way it's written at the moment, I think there's
roughly about eight asset classes that we can prescribe.
The Government is still wanting that element to be passed over to the pools, but I'm steadfast
in saying that that should be here and sat with this committee.
But it does mean that rather than having at the moment we could say we want X in growth
equity, X in UK equity, X in global, X in that, equity is all you get to say.
Not sustainable, none of that.
However, and this is why I say it's grey, is that that's just because that is what the
primary legislation is likely to say that isn't the approach that our pool are taking.
They've been very much discursive wanting to work with us and whilst we've got that,
it is clear that we do need to make sure we do get some firm SLAs and
some governance frameworks set up long term to protect us for the future.
Because at the moment, we've got a good group of individuals working in the pool
who want to work with us.
I can't guarantee that will happen long term.
Statute is written in their favor, not ours.
So we need to embrace the team that we've got at the moment,
work with them, because like I said,
they are really good, they wanna listen,
they wanna embrace, they want us to want to invest in them.
We also need to bear in mind though,
32 funds, probably 350 mandates.
We're gonna have to compromise.
So there's gonna have to be a give and take on both.
So I'll leave it with me on that point,
and I'll probably throw it to Jenny, whether she wants to add anything extra from the SIB's perspective.
Thank you, Paul. I think I just completely endorse you, Paul, and I think the really important thing is that
we work collegiately together and we always bear in mind what the ultimate game is to make sure that
we have enough money to pay your ultimate pensioners. I think the really big thing, which I'm sure all of
your advisors will do, is getting your asset allocation right and really being, you know, I think
My big job is making sure that we understand your strategic objectives.
Paul has already mentioned that you're hopefully going to stay fully funded.
Cash is going to be important to you.
And so therefore, I think it's really important that we really understand what the key objectives
to and for you are.
You talked about your 10 % buffer and how we make sure that we protect that for you.
As Paul says, our job is going to be a little bit harder because we've got 32 people to
try and meet.
but I really hope that your, you know, the proof will be in the pudding and my credibility will be in how we work,
but it's very much about trying to be honest and transparent with each other.
I recognize that Paul has already alluded to a little bit in terms of how we make sure the governance works
and that you get the assurance that if it's not working, how can you let people know that and navigate around that.
Councillor Dickard.
So Councillor Gatz, can we come back to you?
You've got more questions.
I have to hear on that topic.
That's fine.
It's all from the same topic.
So it says under pooling, the pool may decide to invest outside of their collective investment
vehicle.
So who makes that decision?
So that would be the pool.
So I said.
Which individuals?
So it will be Jenny and their team.
If we're looking at the letter of the law, we can only say we want X in equity.
Which we don't choose the managers now.
That's when we come onto the other paper later on when we're talking about the performance of underlying managers.
So that's been there for a while.
There had been some discretion because under the old framework it was called compliant or explain.
So the idea was there that if there wasn't some, if the pool didn't have
exactly what you wanted you'd go off and do your own thing. Bit like the reason
why we when we went and did energy transition and we selected those
managers, the pool don't have any energy transition managers on their
platform. We wanted that specifically so we went off and did our own. That's not
an option anymore. So literally all that we're able to do is you know is being
quite bland and saying that we've got those high level levels of you know
asset allocation but and this is what I'm trying to reiterate just because the
way that the legislation is worded which is worrying and look where why a lot of
people didn't you know challenge the the direction of what the government wanted
to go in with we are fortunate that we have got a group of people currently in
sitting in in the sieve that are wanting to engage with us to take our views into
account. How long that lasts and where it goes is as much on us as well as our
willingness to compromise and not just us the other 31 partners in the fund in
the the SIV as as well because without it then we've got no choice in what we
can do because we can't expect the SIV to be able to produce 32 strategies
going forward. It's not possible when we come on to what we'll be looking at
You'll see some of the way that they're trying to engage and provide pragmatic solutions.
So there is still choice, but not as much choice as you had before.
We can't do that when you've got 32 partners.
Mr Dickerton.
Yes, so this relates to the question of ethical investment.
So previously, as I understood it, if a complicated ethical investment campaign came to the Council,
there was the option of fundamentally at the end of the day, balloting the pension recipients,
the members, if it got to that stage. And we discussed that at the committee two committees
ago. How does that relationship with the actual council workers function now in the control
they have over directing the pension? If it's, would you have to do it across the 32 boroughs?
Every single worker would have to be balloted on a decision on a complicated, you know,
The elephant in the room I talk about is Palestine, right?
So there are lots of campaigns around Palestinian solidarity.
Council are in a difficult position because of our fiduciary duty.
I'm imagining as popular support grows at some point,
there will be calls to go directly to workers to find out
whether they are happy with the investments that their pensions are making.
How would that operate now under this new system?
Okay, so if I start, Jenny might want to add later.
So the corrupt and the key legislation has not changed and that is clearly laid out in
Nigel Giffin, KC's advice about exactly what you can and what you can't do.
And despite what some articles may have alluded to in the media, there aren't any funds
that have gone down and actually done what's being said.
So you know, because when they've looked, they have tried to explore to that and they've
hit roadblocks.
So, certain funds, I'm not going to name them here, but have been used in petitions and
other things, are not doing exactly what they have been said that they are doing.
Don't get me wrong, they are exploring and they're trying to see exactly how they can
help and support.
What we've got to realise is that no matter what we want to do, we have to have the SIF
to implement what we need them to do.
The SIF cannot have 32 different approaches.
I'm not going to go into more detail now because that's the crux of the private session
and it's obviously got commercially privileged information on those details about how we're
working on that progress.
But I think you will be pleased to see that there is elements where if we're pragmatic
and sensible there will be choice.
The degree of that choice needs to be reflected upon your main aim, which is your fiduciary
responsibilities to deliver returns and to make sure that that is dealt with within the key legislative framework that we're operating within.
So it's a long -winded way of saying that we still will have an element of ability to go to our personal fund members beyond that of the 32,
but there are not going to be 32 options.
There will be a handful of options, or two handfuls worth of options, and we'll be able
to work within that framework what the committee think is right and proper.
And then we need to make sure that even if we want to go down a certain pathway, we may
need to see if it needs a ballot, depending upon which selection you choose.
If you checked a particular route, it may not need a ballot, because it might be within
that, the parameters that mean it's not material, and actually it's in our financial interest.
Clearly, if it's not, if it is going to have a non -financial impact, then there is a very
clear steer that you need to go and ballot based on KC advice.
I don't know whether, Jenny, you want me to add to anything?
I guess my follow up is then it would be useful to hear, because there's also alongside, you
know, specific things to do with the genocide, there's a separate question of, you know,
UK arms and defence funding to be part of ESG funds, right? That's a political campaign.
As a council, as pension, you know, pension funds, are you saying there will be choice
to avoid those kinds of national decisions or are they fundamentally being taken out
of our hands so that the government can do what it wants to do along those defence spending
lines? Because I do think it is really important to be able to have an honest and frank conversation
around local government pensions being spent on arms companies.
I mean, beyond the question of current affairs,
there is a long tradition of trying to,
even before the current moment, a tradition in which many workers
would feel uncomfortable with that.
We had it on mines.
We had it on munitions.
So I just want to understand who, where should,
if one does want to try and avoid local government
pensions going into the arms industry, where would the responsibility lie now?
And would it be that again the 32 buyers need to collectively make decisions and therefore
the workers who receive the pensions are losing their voice or is it we have to come knocking
on your door and ask you to offer some options of fund managers that aren't going to be investing
in that?
Can I suggest that we take it up in the closed session because we're covering the RI and
what the options are there but we'll give you a bit more granularity on that side of
Thanks.
I would say quickly just on that point, because you asked about the government, and this is
a clear distinction.
If the government sanctioned something like they did with Russia and Ukraine, that clearly
sits above and beyond.
And the other thing just to note, which again I'm going to get picked up later, but I thought
would just be good for airing in the public element of the conversation.
There's a difference between looking at a particular sector that cuts across the whole
world than looking at a geographical location. So there's a I just want to
make sure that the people understand I thought that'd be good to just put it in
this part of the meeting there is a clear distinction about taking
appropriate action on on sectors rather than geographical regions.
Councillor Sarah although before we get to Councillor, I will throw in one thing as
chair just talking really to the public at the moment because I think perhaps
Some of the members of the public may be wondering,
what are these closed door sessions that happen?
And it's just to emphasize that we are advised
by commercial entities like ELSIF,
and they have trade secrets,
and they're gonna come talk to us about those things,
but they can't do that when their competitors can hear.
So we afford them the courtesy of privacy for that.
It's not anything more nefarious than that,
but I think that's worth explaining from time to time.
Councillor Serra.
Thank you.
I'm happy to wait until Councillor Cass has finished with her questions.
I do have one more if that's okay.
And that was, so we're back on page 72.
We've got a report on local investments.
So is that local infrastructure investment we talked about before?
And also there was a greater definition of local, wasn't there?
Did that get resolved?
It sort of has been resolved.
I mean obviously part of the debate is does local mean your the
administrative authority i .e. Wandsworth or does it mean UK like it currently is
I think it's a hybrid at the moment now where they're saying that it's it can be
your either your admin authority or your pool area now for London that is quite
finite and some of our investments certainly when we've looked towards
trying to do UK orientated ones, whether it be in property or whether it be in infrastructure,
would you want to be overly concentrated in London?
That will be a question for the SIV when they're looking at it.
It will be for them to determine how and where these investments are likely to be.
But local for us will be London.
Okay, my question was, Paul, earlier on when you were talking about we're likely to have,
say, over about eight asset classes, do we know what proportion approximately that will
form of the overall fund?
It will be 100 percent of the fund because you'll save 55 percent equity, 20 percent
bonds, 10 percent this, 5 percent that.
That is what, so it would be the 100%, but the granular detail, whether it's growth, whether it's value on equity, whether it's UK, whether it's global, whether or not it's more moving into some more niche areas,
that's going to be under the prescribed legislation at the sole discretion of the pool.
But I keep reiterating that, and this is the challenge that we've got, if you read the key legislation,
We are handcuffed substantially about how we can do anything else.
So it is working with the SIV, but it's also our willingness to compromise.
Because the only way the SIV can continue to work with us all is if all 32 boroughs and their funds are not digging their heels in over a small granular particular point rather than the wider picture.
And we've got to think about the wider picture rather than whether or not we want it necessary
to be in Somerset rather than in East Anglia for example.
It's that type of thing, we need to be flexible ourselves.
But no, we'll set 100 per cent, but even with that, the Government were quite clear that
it's discretionary and their preference would have been to pass that over to the pool as
well.
Other funds may well pass that over to the pool.
You may decide you want to do as well.
I would argue that it's not in our interest to do that because, you know, trying to juggle
32 and get all 32, we know ourselves and what we need more, I would argue, and therefore
why we should retain that.
We have quite a few more of these general matters to cover, so should we move on from
this to some of the other issues?
Thank you.
I think the rest of it hopefully will be quite, you know, easy to go through.
I mean the next stage is the funding strategy statement.
Now this links back to the previous paper
where we talked to you about the road map to valuation.
This is just basically putting in
that this is the updated version
that we'll be going through.
What this sets out is our approach
to how we achieve that, what we classify
as our level of funding.
It looks at how we engage with the employers
in regards to our approach to risk management.
And so we will be going out to consultation.
This does get circulated to all of the employers for them to comment upon.
I'll be pretty honest with you, in the last few times when we sent them all out,
we don't get any feedback coming back, which I hope takes credit that the team
of working with the actuary have delivered something that everyone thinks is fair and
reasonable, but it might just be that actually people are only really interested
in how much they're gonna have to pay when it comes to the contribution rate,
rather than how you actually get to that figure.
No quick questions on that bit.
I'll go on to the next part, which is the additional B shares.
So London CIV are a regulated body and as part of that they have requirements of capital
that they need to retain in order to fulfil their legal obligations.
funds. So this is just highlighting that the fund has had to put additional money into
the scheme. I would use this as a key point to highlight one of the challenges that we
have being the only fund to be a joint fund and merged. And technically we did have two
shares but we are treated as one shareholder and that went through the last change and
And this is evidence that the legal framework of that is working because the risk that we
had at the time was we could have been asked to make two contributions.
This just shows in proof that the work that we did last time around is effective and the
control process is working because we've got, we are one demand, so we paid for the one
share for what we've got going through.
So all of the 32 shareholders are paying an equal sum of money and that's to shore up
the regulator capital that we are required to have.
Thank you.
The next one is, I think we talked about before, so it was included in the minutes, it was
the Board Chairman's report, so I don't know if there's any particular questions that you
would have from the Pensions Board.
And the next element we have is on Pensions Dashboards.
So again, this is something you may well have seen in the press.
So this is to help individuals out there who may have gone from job to job to job
and lost track of where they've had a pension. And so the government of
creating this tool where people will be able to log in and try to locate and
find out what pensions that they have, it clearly means that there's a considerable
amount of work for Martin and the team in order to try to make sure that we've
got the relevant data set and when inquiries are coming in.
So we are working with our providers to help support us on doing that to make sure that
we have everything we need to do on time and meet the requirements.
So I don't know if there's – oh, yep.
So I'm interested in a broad question on this.
The pensions dashboard has been on the government agenda, various government agendas for some
time, and we've seen nothing, basically because it's been technically impossible
to achieve.
How come this deadline is now three months away and achievable?
And where can we direct our members on the 1st of November to log in and view their pensions?
Is there going to be a website that people can do that in reality rather than in tension?
I might pass you over to Martin who's…
Yeah, there will be at least two dashboards, national dashboards,
money advice and pension service will have a non -commercial dashboard and then commercial
companies will be launching their dashboards where saviors can dial in and access their
pensions information. So we'd expect there to be a big campaign, government campaign
to direct people to dashboards and then also if they do match with the Wandsworth Fund
and there'll be a signpost to the Wandsworth members website.
So yeah, I think there'll be lots of information coming.
But the other thing to say is this
is our deadline to connect the ecosystem.
It's not the deadline for members
to actually go on and look at it.
That will be down the line when this has been,
when everyone's on there, probably in six months time,
members will be able to go on and look at the information.
And that's when the government campaign
will launch. So this is a deadline to sort the back end out, the front end is sometime
in the future? Yes. Okay. And follow up question from me, what level of information are we
putting onto the dashboard and how many queries is that going to generate for you? Because
it loves to be partial because final salary pensions are really complicated. The question
how much money am I going to get is a reasonable question a client or member will ask and they
will like. It's very complicated. When do you want your pension? What scheme are you
in, what version of the scheme, are we going to get potentially a big influx of inquiries
that you or the admin team are going to have to deal with next year that we need to be
mindful of? Because people are going, oh, I've got a pension, how much is it worth,
and all that other kind of questions that they'll generate.
Yes, so we have to put on the information from the last annual benefit statement will
go on to the national data view, so we'll see on the 31st of March of the last year
what the value of their pension was.
And there will be admin issues for people who don't match.
So they won't be asked for their national insurance number
to log on to dashboards.
So that's not a mandatory field.
It would be named day for birth, forenamed last name.
So there will be plenty of mismatches.
And we expect people to try and contact us
and try and match.
So it's hard to know exactly the volume
of traffic that will come.
We hope we can establish identity in an automated way
which we can ask some further questions and try and match
to get the information to them.
Okay, so the final bit
of this paper is just advising you
of the consultation that's just recently been launched.
As many of you will appreciate, many of the individuals who are in the LGPS are not the
high paid executive members, they are quite low paid, part time people who have probably
got low level service, many of whom are women.
So this is looking around to try to be, looking at reviewing the schemes to ensure that it
fair and equitable and and having an appropriate access through to the scheme
so there's a number of areas which are going to be covered which would include
things such as the gender pay gap and and obviously looking at how people and
more people have opted out the scheme so it's just highlighting that there is a
consultation out there and clearly once that's gone through the process there
maybe changes to the scheme that will have implications for us.
So I think that was it for this particular paper.
If there's any questions on it.
Thank you.
May I take it that we're all in agreement with those updates?
Thank you very much.
Quarterly investment performance.
How have we been doing?
Yeah.
Again, I mean, we've discussed this in the past in particular, and it's the same goes
round for this two elements really to the performance level.
It is your strategy and your asset allocation, and then it's how it's been delivered.
And if we look at the absolute performance on paragraph two, you can see, I mean, I never
can get too fixated over the short term performance. But if you look at the three years, which
is really the minimum sort of period where we ought to be considering and the process,
you'll see that the fund itself has outperformed its local authority average by a reasonable
margin between 4 .4 versus 3 .7. That's the positive news. The disappointing element of
is that if we achieved its benchmark big on the asset location we should have
been achieving 6 .1 that means that our cohort of managers have underperformed
by 1 .7 over the annualized period over a period of time. Most of that
unfortunately is down to our equity based managers and you know they are
through the pooling environment and the challenges that we face. Now there
There are options that we can look to do.
Obviously, I'll let Jenny and James talk about whether or not, and the processes about how
they're managing the process with those particular managers.
But we always were looking to try to see a part of the asset allocation review, whether
or not we consider that we decide that we don't want to take active risk anymore.
It's planned for the future and we would always consider doing that as part of our
asset allocation review.
So there is no necessary reason to bring that forward earlier, but I thought, bearing in
mind this has continued going on, and I think we should at least at the very minimum note
that we're considering bringing it forward and doing anything else whilst we have the
SID here present and yourselves may have your own personal views as to whether or not the
should continue to take that additional risk. There are pros and cons for doing
it historically if you go over over a broader period of time and let's say
five ten years you may well find that the performance on active return if you
stick with it for that long has delivered excess return we haven't got
that data set here and that and it's a bit of a challenge doing everything else
that we've got because of the merger of funds etc but in a historically longer
term active managers have in the past outperformed but bearing in mind that
we get you know in especially in down markets and therefore we might be going
into that where you where you have that other potential to do it however we've
been saying this for a long period of time we've been saying it the managers
have not delivered so even if the strategy is right are the managers right
and we have no saying that that's down to the London CIF so it was right to
bringing it and they have this conversation here when the London Civ are here to be able
to give their perspective rather than try and do something when they're not.
So that's why you've got the recommendation and the comment the way it is when they're
here to be able to give you some answers themselves rather than me speak on their behalf when
I can't do that.
So that was really it for a broader introduction unless you want me to go into any more detail
otherwise I'll pass you over to questions which you may have of either me or the London
Civ or Tony at Mercer.
There will be some points of view.
Thoughts on this?
Should we be going for a more passive investment strategy or probe the reasons for the shortfall
in the active strategy?
Councillor Dickerton.
Just as a question, that's a time sensitive decision based on the fact we are all about
to merge.
If we're going to do something, we've got more influence and chance to do it before
the 31st of March, which is why I'm saying to bring it in now.
I'm also posing a question, so you said is it the strategy or is it the managers?
Who can answer that for us?
Well I can, it's the managers.
It's very clear that the benchmark is 6 .1.
we should have been getting so our strategy over the three years has
delivered outperformance on our peer group but our strategy should have
delivered 6 .1 if the managers met their benchmark and it's not just the
equity ones it's a balance of it but bearing on 57 % of this fund is in is
currently in in equity the lion's share of that difference is due to managers
and in particular two, that you will see when you look further on down on the
table, Bader Gifford and RBC are continually underperformed in recent
years. We haven't had a long history with RBC to bring that out over a wider
context. Bader Gifford's strategy has performed better outside of those three
years and that's the consequence. If you opt out of it, you
may well be giving up that upside that they may be due going forward and you
have to accept that we may then underperform our peer group because we
are going on that basis where they've capitalized on that excess return. So
hence why this isn't you know fait accompli it's not just obvious because
they're doing things the way that it is. You know the SIV and you know our
consultant may well be saying to you have faith in the strategy they think
that currently the economic climate is such that they would now is right for
opportunity for them to outperform but it would be remiss of us not to pose
those challenges to our consultant and to our provider whilst they're both here.
Councillor Cavy. Can I just clarify then are we looking to make a decision on the
passive versus active today or we're just looking to take it into the next
meeting as a discussion point? You need to have clear advice. We can't make this
decision. You're not furnished with the relevant information to
make any decision. We were always going to do it as part of the asset allocation
review which we'll be looking to bring probably complete around December time
where you know we'll be having proposals and I was telling the
Tony early on today about bringing about our roadmap on that would be so there
would be sufficient time in order for us to do it before we enter into the new
mandated framework even if we were to leave it to it. I'm just making sure that
we raise it, we minis it, we've got all this conversation, we know it's all going on,
so I get a steer from yourselves because if you're actually saying from
discussions actually you do have faith in active long term and you
think that's where we should be, it's a moot point this, therefore we
should be pressurizing the CIF solely on their manager selection, not on whether
or not we want to take the risk management approach of active versus
passive, so there's two and that's why we're having this discussion now because
If you think that active is still right, then we still need to be pressurizing why we got these managers who continue underperform.
But if you want that broader discussion, that's when you need to have some proper detail and advice about what we do and how we go about it.
And that's not for today.
That's going to be for a future meeting.
But it's do we do that work or not?
Because if you're happy with active, then there's no need to do that work.
Well, I strongly think we should do that work anyway as a matter of course.
But we should also be putting pressure on the active managers to do a better job in
case we don't decide to move to passive.
So I would say either way we should definitely be doing the work to discuss active versus
passive when we talk about the asset allocation.
And I guess a question would be, you talked about other similar sort of pension funds
performed slightly worse than us. Is that because they had different active
managers that were even worse or were they under passive management?
I don't know. I don't know because that that their return is based on their
actual return. I don't know what their benchmark would have been. They may have
had different approaches. They may have a different plan. They'll have different plan. They'll have different funding
levels, they'll have different cash flow requirements, they'll have different risk
appetites. So I've always been very clear in saying we should not be looking at
how we deliver really against our peer group. It just so happens that you know
over time and you know that's why I'm just raising it I'm not using it as an
excuse and they look at everything else because we've outperformed that group so
we you know this this is showing that we're actually being open transparent
and having this conversation at the right time we don't want to rest on our
laurels and thinking oh well we're doing better than everybody else so that's
great because we're not you know we you know we should be doing better than what
we are and you know, primary aspect of where returns come from is your asset allocation.
Now that looks like over the last three years that has been broadly successful.
Where it's been reined back in though is as a result of how that's been implemented, which
is beyond our control.
Councillor Pridham.
Thank you very much.
I understand if you might not have all the details to hand right now or might not be
able to disclose them in this setting.
But do you have any sort of broad idea as to why those two funds have underperformed in recent years and are
The reasons for that things that could well be reversed in the next few years and we could well see you know
That that point you made earlier about them recouping the ground that they've lost over the last few years. Is that a realistic?
course of events
I'll try defer to to Jenny and to and to Tony if he wants to add anything extra as well to that point
Thank you.
My plan was to go in to be able to explain that to you and what the managers are saying
and then what we are saying.
If I may, I would like to make a couple of comments.
Firstly, I think it is right that you consider you are active and you are passive.
I would just draw your attention to different types of benchmark.
It is really important that if you go passive, there are a whole host of benchmarks to consider.
There is a whole host of costs incurred with changing the approach that you want to make.
And then I think it is also important, and I will go into this, the style of equity manager
that you have got exposure to at the moment.
It is a growth -orientated manager, which is a particular tilt and maybe partly explains
why it is underperformed against a general benchmark.
But I will go into that in detail.
So I think it is an important conversation that you have, but I am sure you will get
advise there's a lot to consider and it's not just and the one thing that I
would highlight to you is you may well have heard in the press quite a lot of
reference to the magnificent seven but just to bear in mind that 20 % of a
general equity global index is made up of seven companies so you're getting a
lot of specific company risk in that exposure so I just call all of those
things to your attention.
I just wanted to clarify my own understanding around next year.
In that next year we will still have the decision -making capacity to be able to decide our asset allocation.
How much will be active, how much will be passive.
We won't have that.
So the only decisions is around how much in equities and how much in bonds and so on.
That's the way the legislation is written, but like I said before, you know, the engagement we're having with the CIV,
we would hope that our wishes would be fulfilled, but the way the legislation is written, no.
But the way that the CIV is saying they were proposing to work with us, yes.
Thanks, Chair.
Just a few comments.
You know, clearly active versus passive management is a key investment belief, effectively.
So it's not an investment that this is part of the Fit for the Future discussion.
It is not an investment strategy decision.
I accept that.
But it is many – most of our clients, when we speak to them, we advise them, we set out
investment beliefs.
And whether they believe in active or passive in different markets is a fundamental part
of that.
So it's quite correct that the proposed pensions bill, which is now in draft, of course hasn't
been passed, but that does absolutely say that the pool will not have to, basically
that's a decision for the pool, but as a minor standard is the pool could still voluntarily
decide to give that choice to its partner funds, and that certainly, as Paul said, is
our understanding that Elsif will let's give that option.
So absolutely right that you should review whether or not active or passive, whether
you remain committed to active management.
If developed market equities,
whether you believe,
you currently have a balance,
you do have passive as well.
But even if you agree,
let's say that you still want
some active management,
that does not mean necessarily the way you
currently implement that active management
is the correct way.
And certainly style.
Basically you need to have, we would,
we would advise you to have broadly
invested mandates which don't have unintentional style biases and under fit
for the future the expectation be that that actually will be a decision that
they'll be taken away from you and that the pool will do that on your behalf
that they will create blended portfolios of active managers which do take account
of different style biases and blend those in a way to give them more perhaps
we could you call it more of an all -weather portfolio the portfolio
that you've had had does have currently have some particular growth biases for
example, and that's meant that actually there have been times when your equity
portfolio has performed really strongly, but has also been more recently, it's
been performed really poorly. So it's been a bit of a roller coaster and so I
think it's that even if you still, you could still come to the conclusion that
you believe in active management but not implemented this way. I still think
there's work to be done but first of all you need to ask the question, do you
believe in active management about development market equity? So I agree with the
proposed next steps.
That basically covers the question.
It's what we were discussing before, which is that obviously this is the closest the
committee comes to speculative decisions around what path to take.
I think we need more information.
I have one question which I'm sure we can go into this in more detail in the
closed session but again I think for the benefit of the public, what is the cost
difference in basis points between broadly, between an active and a passive
policy? As a retail investor, you're looking at
around about half percent I think which is quite a lot over many years.
What is it in this level of investing?
Well, I'll give you a kind of a general view and then you can have some,
hear some real numbers from what else you have to do.
I mean, effectively for large institution investors now you can practically get passive
management for free.
I mean, I mean, it's like, you know, half a base point, a basis point.
And some indeed, but there's even instances where if you do stock lending, you can always
be paid.
So it's a passive you can, I think, almost think of as almost free.
And then active management clearly depends on how active the managers you are, your point.
But um, you know, you could be looking anywhere between kind of 30 40 50 60 basis points
Or more sometimes for active management, but I'm sure but else if could give you some actual kind of hard concrete examples
Yeah, just on your bailey gift head one at the moment. The fee is about 24 basis points. So
We would hate that active is in that 30 to 40 or not any any higher given the scale
that we're able to get from being pooled and having quite a lot of money with them.
But you do need them to be outperforming by that amount to justify it.
Just on that, so the fees are a minor part of the puzzle, but the relative underperformance
is the fees will explain 10 % of it.
So it's much more about manager style, manager stock selection, I think.
So sure, cheaper is better, but if the good manager, if there was a good manager, we could
pay 10 basis points more to, and they would outperform, they'd be worth every penny.
For me, fees are quite a small part of a bigger puzzle, which is what you've already said.
And I think that highlights this philosophical difference, is that one side believes that
active managers average out around the average, just by definition, and then you have to load
in the fees or not. So if you're going to be spinning the wheel to decide whether you
are a good manager or not, the one thing you can count on is paying less if you are a passive
investor and that will stand you in good stead over many years. Whereas the other point of
view is that if you make your wise choices, you'll make an awful lot more money and that's
where these views differ and they're very good points on both sides.
Have we thrashed this one to death?
Good discussion, but thank you very much.
Thank you very much indeed.
So the other point, just a note on the paper itself, and then I'll just get a clarification
point on what we're going to be doing on the active versus passive, is you'll notice that
we've continually had excess cash, that we've been running for a considerable period in
saying we'll roll it over, we'll roll it over.
We are, you know, as I said, substantially overweight on the cash.
So we're proposing potentially to do some rebalancing and to put 50 million of our access into the LGM passive mandate
because that's the easiest, cheapest in order to maintain if we were to make some changes in advance of the asset allocation review.
It still would mean that we are certainly within our tolerance levels.
We will be over the 55 % allocation, but well within the 65, even if you move the 50 million in.
It still would mean that we are looking at around about just under the 3 % threshold that we'll have within cash.
So, because we've got 136 million, which is roughly 4 .3 % of our funding cash at the moment,
so we're proposing to put about 50 million of that into equity.
We're delegated to do that within officers anyway to rebalance and everything else, but
rather than just doing it naturally, I thought I'd bring it here and get your views.
I've been on the committee long enough to know you were very keen to have lots of income
in the fund and lots of cash.
Is it excess income that's led to this too much cash?
Does that mean we slightly went too heavy on income producing assets?
We could put that in mind when we talk about asset allocation review in a while.
No, it's a certain individual over in the US and then we've got a lot more money that's
come through our way because of the currency fluctuations.
So that's given us that extra – so we're still saying having that additional money
and flexibility.
We still will be above 1 % and we're still proposing to keep more than 1 % to give us
that availability.
But it's up and down.
But sterling's moved considerably over the last month or so in our returns and what we've
got coming back.
I think I do have some of the figures somewhere.
I mean, in May we made £19 .7 million on our hedge.
So that just puts things into context with 14 million in April.
So we had money go the other way before and dropped it back.
So that's why we've always wanted to have a higher level of return, but because now
actually you've got currency running at a higher rate.
It's still below purchasing parity, which is around 144 in the dollar.
So we've still got roughly movements and certainly when we talk to our hedge manager, their view
as a house is that it will be continuing on that basis that we're looking at so
that's why you know putting it into LGIM means that if it was to reverse and
we needed to get the money out it's an easy way to it's short term so and what
we're also seeing is when we were having our the interest rates that we could get
for cash it was high it was above our discount rate we're seeing that gradually
now beginning to deteriorate. So now's probably the right sort of time. When we were getting
over 5 % return on cash, there was no real need to move it. Now it still is high, don't
get me wrong, and it's still doing better, but it is going in that other direction. So
it's probably more prudent to us to put it into the Elgin fund.
Yeah, just a very quick question.
Where we were talking about being consulted on adding another 50 million, is that likely
to be phased or will that be in one go?
No, 50 million and 3 .2 billion isn't material, so it will just be once.
We were planning on coming back in December. Are you happy with that date or do you want
it brought forward?
Next meeting.
No next meeting since September but but the asset allocation review where this
would normally be part of and we would include that into the wider picture of
everything that was due in December so the question is is are you happy with
that to continue or did you want the review on active passive brought earlier
separate from the asset allocation review that was why I wanted that just
to just to make sure you're happy with it still being December or do you want
it earlier you won't get the rest of the asset allocation review by then but it
just be active person person.
But I'm announcing my apologies earlier.
It's the one meeting I can't attend of the whole cycle.
It's going to be a thriller.
It's going to be a thriller.
Whatever your plans are, cancel them and come to this.
I think we're looking, if you don't mind, for a slightly earlier shift to that.
So would that be okay?
That's why it's here, just to get the views of yourself.
Thank you.
And I'm a little – looking at it in isolation, I'm just a little concerned about picking
one part of the asset allocation conversation separate to the amount going into fixed interest
and other things, because I think you can't make that decision in isolation, really.
And also, I do wonder if the implementation deadline is the 31st of March, so if we gave
of clear instruction in December and you've by January you said to the sieve
my committee have said we want to reject our extra allocations they probably
accommodate as long as it's done by March we probably be right yeah there is
sufficient time my personal view is it should be done together in relation
because of work with all the things all married in because you'd be looking at
risk profiling your risk profiling active passive is an element versus what
you want to do with regards to other aspects. However, if you were really concerned, now
is the time to say, look, we want to do it sooner.
It's just a compromise. I mean, Councillor Craigie is the investment professional among
us.
And there too.
Amongst the members. There are many people very financially qualified sitting here amongst
the members. But I do believe that Councillor Craigie is the one most actively involved
in the market, so his view may have some sway here.
But can I just suggest perhaps you warm us up in September with some material that would
help us think about this, and then we can make a decision in December.
Would everybody be happy with that?
Yeah, so we'd like a nice warm -up act, please.
And then Councilor Lickitum can have the best of all worlds.
So and, yes, and the final point is that you will make some adjustments in line with point
see as necessary.
Thank you very much.
So I believe now we are going to close the public session.
And as I explained before, this is so that London's have come to talk to us freely and
openly.
As many of our advisors have come to every meeting, we usually have some advice from
people and that is the condition that they give us their free and frank advice, is that
they do it in private.
So I'll ask Mr. Cushwell to close the public session now.
Sorry, I beg your pardon.
We actually need to have a resolution on this one.
Thank you.
Resolution that under section 100A brackets 4 of the local government act 1972 the press
and other members of the public be excluded from the meeting while item 9 is 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. Is that agreed?