Issue - meetings

Members were presented a report on the London CIV consultation on their proposed strategy.  It was explained that a governance review highlighted a number of issues and indicated a need for the LCIV to both change its governance arrangements and clarify its purpose and future strategy.  In response, LCIV initiated a consultation on it future strategy and aims including a number of proposals on its governance arrangements and longer term strategy. 

Members expressed disappointment with the consultation process and suggested that further information and clarification on the Investments element  be undertaken.

During the presentation of the report, officers highlighted the proposed governance and client engagement that would take place (pages 81 and 82 of the report refers).

The LCIV set out three flexible mandates:

·         Low Cost: Passive Equity Funds and a Liability Aware Fund.

·         Basic: Blended Investment Mandates established across asset classes with LLAs selecting fixed amounts in each according to their Strategic Asset Allocation.

·         Enhanced: Blended and Low Cost Investment Mandate established with LCIV providing tactical asset allocation as opportunities arise.  LLAs would be able to tailor the amount of discretion afforded to the LCIV in their individual IMA. 

Members expressed concern regarding the LCIV’s direction of travel for local funds and its decision making on its strategic asset allocation. .  Officers stated that the LCIV was there to deliver the Fund’s strategic asset allocation and that we will not know for sure whether this can be delivered until the LCIV’s proposed client engagement has run its course.

It was noted that neither the Real Asset Management mandate nor Private Debt mandate is presently available from the LCIV.

Members agreed that the Pension Fund would consider the impact of  ESG on its investment strategy.  It was advised that ESG training would be delayed until views were sought after the May 2018 elections, before making any ESG changes to the Investment Strategy. 

Larissa Benbow, Head of Fixed Income, LCIV, was invited to address the committee, during which she provided an update on the CIV to members and outlined the London CIVs priorities for 2018. 

Members discussed in depth the LCIV’s investment proposal Ms Benbow was able to clarify a number of points from their consultation paper.  

During discussion, members raised concern regarding the turnover of executive staff at the LCIV. 

RESOLVED: That

i)          The Committee noted and provided comment on the content of the report.

ii)         The Committee noted the Chairman’s response to the LCIV questionnaire on their proposals on its governance arrangements and longer term strategy.

The Committee received a report which informed of the decision to extend the investment Adviser contract for a further year until 31 March 2019. 

The current extended contract would expire on the 31 March 2018 and had the option to extend for a further 12 months.

Following the Committees decision on the 21 November 2017, a procurement and tendering process had commenced.  Subsequently however, the London CIV published a consultation which aimed to clarify its purpose and set out the direction of its future strategy.  In view of this announcement, officers in consultation with the Section 151 officer believed that the best outcome at this time was to defer the procurement of an Investment Advisor until 2019 to benefit from service continuity.

RESOLVED:           

That the Committee noted the approval of a one year extension of the existing contract for the provision of Investment Advice with Hymans Robertson LLP for the period April 2018 to March 2019.

The report before members reviewed the performance of the custodian, State Street, for the period October, 2016 to September, 2017.

The Global Custodian, State street operated a wide range of functions during this time period.  These fell into two main categories; safe keeping and custody together with Investment Accounting and reporting, all detailed within the report.

The services provided were reviewed to ensure best value for money and confirm that the fund is benefiting from all of the services the custodian could offer.  The performance was assessed against specific criteria detailed in the table at paragraph 2.3 of the report.

In conclusion, officers were satisfied with the safe keeping and custody functions provided by State Street custodians. They were pleased with the overall investment accounting and reporting functions but will continue to work with them to drive improvements in the level of service.

Estimated costs for the service over the relevant period are estimated at £24,365 which represents a reduction compared to the previous year.  This is due to the Fund’s use of pooled funds which reduced the custody and transaction charges.  Consideration will be given to changing the use of a custodial service once the Fund knows which assets will be held outside the London CIV.

The Pensions Committee:

NOTED the views of Officers in respect of the performance of the custodian.