Agenda and minutes

Pension Fund Sub-Committee - Tuesday, 4th September, 2018 7.00 pm

Venue: Committee Room 3 - Hammersmith Town Hall. View directions

Contact: Amrita Gill  Tel: 020 8753 2094

Items
No. Item

1.

Minutes of the previous meeting pdf icon PDF 246 KB

To approve the minutes of the meeting held on 23 July 2018.

 

Minutes:

RESOLVED

The minutes of the meeting held on 23 July 2018 were approved and signed by the Chair.

2.

Apologies for absence

Minutes:

Apologies for absence were received from Councillor Rebecca Harvey and Matthew Hopson (Strategic Investment Manager, Pensions)

3.

Declarations of interest

If a Councillor has a disclosable pecuniary interest in a particular item, whether or not it is entered in the Authority’s register of interests, or any other significant interest which they consider should be declared in the public interest, they should declare the existence and, unless it is a sensitive interest as defined in the Member Code of Conduct, the nature of the interest at the commencement of the consideration of that item or as soon as it becomes apparent.

 

At meetings where members of the public are allowed to be in attendance and speak, any Councillor with a disclosable pecuniary interest or other significant interest may also make representations, give evidence or answer questions about the matter.  The Councillor must then withdraw immediately from the meeting before the matter is discussed and any vote taken.

 

Where Members of the public are not allowed to be in attendance and speak, then the Councillor with a disclosable pecuniary interest should withdraw from the meeting whilst the matter is under consideration. Councillors who have declared other significant interests should also withdraw from the meeting if they consider their continued participation in the matter would not be reasonable in the circumstances and may give rise to a perception of a conflict of interest.

 

Councillors are not obliged to withdraw from the meeting where a dispensation to that effect has been obtained from the Audit, Pensions and Standards Committee.

 

 

Minutes:

There were no declarations of interest.

4.

Draft Pensions Board Minutes pdf icon PDF 237 KB

To note the minutes of the meeting held on 27 June 2018.

 

 

Minutes:

The minutes of the meeting held on 27 June were noted.

5.

Pension fund quarterly update pack pdf icon PDF 147 KB

This report provides an update for the quarter ended 30 June 2018.

 

 

Additional documents:

Minutes:

Kevin Humpherson (Deloitte), presented the report for the quarter ending 30 June 2018. He noted that there were no significant changes to report and welcomed any questions from the Committee.

 

Michael Adam asked why the Partners Group – multi asset credit fund had underperformed. Kevin Humpherson said that this was predominately due to timing and explained that the Fund’s 3-year investment period ended in July 2017, therefore any investments released had been repaid to investors. As a result, the distribution rate had increased over the last year with two further distributions made during the second quarter to June 2018. There were no further risks associated with this fund and overall Deloitte were satisfied with the Fund’s mandate.

 

Councillor Matt Thorley asked for further clarification around the current position of the M&G – inflation opportunities fund. In response Kevin Humpherson explained that the Fund’s yields had fallen significantly and the manager was expecting to increase the exposure to long lease property, therefore this had created an overlap with the Fund’s long lease property mandate with Standard Life Investments. Based on the difficulties associated with the Fund, he advised that the Committee may wish to consider whether there were options for all or part of the Fund’s allocation which offered at least a degree of “inflation proofing”. The Chair requested that officers explored alternative opportunities and for a report to be brought to the next meeting.

 

Action: Phil Triggs

 

RESOLVED

That the Sub-Committee noted the report.

 

 

6.

Carbon exposure and equity strategy pdf icon PDF 196 KB

This paper updates the Pensions Sub-Committee Members on the Carbon foortprint on the Fund’s equity portfolio and a possible alternative index option for the Fund’s passive equity holdings.

Additional documents:

Minutes:

Aled Jones (FTSE Russell) gave a presentation on sustainable investment and outlined the following key areas:

-           FTSE Russell was an innovator in sustainable investment since 2001 and encouraged companies to increase their Environment, Social and Governance (ESG) exposure.

-           Maintained two core data models: ESG ratings and Green Reserves.

-           By splitting data into these two dimensions users could determine more specifically whether to target ESG issues related to (operational) risk or (product) opportunities.

-           Provided an overview of the sustainable investment framework and summarised the FTSE all-world climate index performance.

 

The Chair asked if FTSE Russell were working with other Local Authorities. Aled Jones said that they had been working in collaboration with the HSBC Bank pension scheme since 2016, to generate a future world fund. Furthermore, they were in ongoing discussions with other Local Government Pension Scheme funds to develop and implement suitable strategies.

 

Michael Adam asked for further clarification on the difference between climate index and balance factors in relation to back tested performance. Aled Jones explained that the main difference for smart beta indexes was that it incorporated 4 different balanced factors. The approach was similar to combining the indexes with the market capitalisation starting point, however in addition included the derived factors. In relation to the back tested data, green revenue data was derived and put together by FTSE Russell, however a third-party organisation provided the emissions and reserves data.

 

Michael Adam asked if the factor exposure was consistent. In response Aled Jones said that the back-tested performance was based on the same methodology that was in effect when the index was officially launched. Furthermore, a dedicated research team was assigned to work on a methodology to derive the data and tilt methodology looked to give the greatest possible exposure to the factor of choice. Factors needed to be balanced more frequently to maintain a level of consistency. Furthermore, the factor weighting was determined during the methodology process and was not optimised when factors were rebalanced. He added that statistical data and performance charts including momentum would be provided to demonstrate that factor exposure was consistent.

 

Michael Adam said that it was important to focus on ESG approaches as well as Carbon footprint and asked if there were any opportunities of broadening the filters to expand this. Aled Jones explained that FTSE Russell had a range of different ESG indices outside of climate. Different options were being explored and they were also considering, combining the ESG and climate approach to offer additional alternatives. He explained that each fund was unique in its approach i.e. some funds were only concerned about climate change whilst some others chose a more broader approach.

 

The Chair asked about the cost implications to the Council if it opted for a more tailored approach. Jennie Baruxakis (FTSE Russell) explained that the standard cost was 2.5 basis points, however there would be additional implementation costs and were happy to engage in further discussions around their pricing model.

 

The Chair thanked FTSE  ...  view the full minutes text for item 6.

7.

Exclusion of the public and press

The Committee is invited to resolve, under Section 100A (4) of the Local Government Act 1972, that the public and press be excluded from the meeting during the consideration of the following items of business, on the grounds that they contain the likely disclosure of exempt information, as defined in paragraph 3 of Schedule 12A of the said Act, and that the public interest in maintaining the exemption currently outweighs the public interest in disclosing the information.

Minutes:

RESOLVED

That under Section 100A (4) of the Local Government Act 1972, that the public and press be excluded from the meeting during the consideration of the following items of business, on the grounds that they contain the likely disclosure of exempt information, as defined in paragraph 3 of Schedule 12A of the said Act, and that the public interest in maintaining the exemption currently outweighs the public interest in disclosing the information.

 

8.

Exempt Minutes of the previous meeting

To approve the exempt minutes of the meeting held on 23 July 2018.

Minutes:

RESOLVED

The exempt minutes of the meeting held on 23 July 2018 were approved and signed by the Chair.

9.

Carbon exposure and equity strategy - Exempt elements

This report contains the exempt elements of item 6.

Minutes:

The exempt elements of the report were noted.