Skip to main content

Agenda and minutes

Venue: REMOTE

Contact: Amelia Christopher  Email: amelia.christopher@surreycc.gov.uk

Items
No. Item

20/20

APOLOGIES FOR ABSENCE AND SUBSTITUTIONS

    • Share this item

    To receive any apologies for absence and to note substitutions.

    Minutes:

    No apologies had been received.      

     

21/20

MINUTES OF THE PREVIOUS MEETING: 13 MARCH 2020 pdf icon PDF 2 MB

    • Share this item

    To agree the minutes as a true record of the meeting.

    Minutes:

    The Minutes were approved as an accurate record of the previous meeting.

     

    To be signed by the Chairman when the current Covid-19 lockdown restrictions are lifted.

     

22/20

DECLARATIONS OF INTEREST

    • Share this item

    All Members present are required to declare, at this point in the meeting or as soon as possible thereafter

    (i)            Any disclosable pecuniary interests and / or

    (ii)           Other interests arising under the Code of Conduct in respect of any item(s) of business being considered at this meeting

    NOTES:

    ·         Members are reminded that they must not participate in any item where they have a disclosable pecuniary interest

    ·         As well as an interest of the Member, this includes any interest, of which the Member is aware, that relates to the Member’s spouse or civil partner (or any person with whom the Member is living as a spouse or civil partner)

    ·         Members with a significant personal interest may participate in the discussion and vote on that matter unless that interest could be reasonably regarded as prejudicial.

    Minutes:

    There were none.

23/20

QUESTIONS AND PETITIONS pdf icon PDF 149 KB

    • Share this item

    To receive any questions or petitions.

     

    Notes:

    1.  The deadline for Member’s questions is 12.00pm four working days before the meeting (8 June 2020).

    2.  The deadline for public questions is seven days before the meeting (5 June 2020).

    3.  The deadline for petitions was 14 days before the meeting, and no petitions have been received.

     

    Additional documents:

    Minutes:

    Six questions were received from members of the public. The responses can be found attached to these minutes as Annexe A.

    Supplementary questions were asked from six members of the public and responses can be found below.

    1. Supplementary question asked by Ian Chappell on behalf of Steve McDonald:

    The questioner referenced the Committee’s open letter of 9 April 2020 noting that the rationale for not divesting was due to protecting the employees of fossil fuels companies, in contradiction to the recent job cuts by British Petroleum (BP) and the letter also noted the concern for worldwide communities if fossil fuels companies stopped using fossil fuels instantaneously. Do you not acknowledge that communities worldwide have been undermined over the last two decades by fossil fuel companies and their employees are not protected? (Annexe B - full supplementary question and the response).

     

    Response:

    The Chairman explained that the Fund’s continued engagement and investment with fossil fuel companies was not impacting on their employment policies as that is decided internally within those businesses.

     

    Officers proposed that a written answer would be provided to the questioner, to explain the matter in more detail.

    1. Supplementary question asked by Ian Chappell:

    Thanked officers for the initial reply, but noted that the Committee had weak evidence that engagement worked. Can the new sub-group tasked with reviewing the Fund’s Responsible Investment Policy consider with regards to large fossil fuel companies such as BP and Shell: setting specific engagement objectives that are measurable, in line with no greater than a 1.5C temperature rise and have a deadline, can those objectives be published on your website and if those targets are not met will the Fund divest?

     

    Response:

    The Chairman highlighted Item 8 on the United Nation’s Sustainable Development Goals (SDGs) which the investment strategy will incorporate and the Fund’s investment core beliefs focusing on Environmental, Social and Governance (ESG) issues. The Committee will not commit to any specific divestment targets, every single investment decision was judged on its merits at the time by the investment managers.

     

    1. Supplementary question asked by Ian Chappell on behalf of Nina Mileksic:

    Within the response to the Freedom of Information (FOI) request at the end of 2019, ExxonMobil was the second largest energy holding in Legal & General funds. ExxonMobil had been criticised as being destructive to both the shareholder value and the planet. What has been the extent of your holdings on ExxonMobil - how much and over what time period and can you confirm that it has no longer any part of your portfolio? (Annexe B - full supplementary question and the response).

     

    Response:

    Officers proposed that a written answer would be provided to the questioner, to explain the matter in more detail.

    1. Supplementary question asked by Jenifer Condit:

    The Fund reduced exposure to fossil equities from 3.6% at the end of March 2019 to less than 3% at the end of December, however during that period the markets went up by 11%, fossil fuels went down by 10-15% so fossil fuels underperformed  ...  view the full minutes text for item 23/20

24/20

FORWARD PLAN pdf icon PDF 54 KB

    • Share this item

    The Committee is asked to review its Forward Plan.

    Minutes:

    Witnesses:

    Neil Mason - Strategic Finance Manager (Pensions)

    Key points raised in the discussion:

    1. The Chairman explained that the items on gilts and the review of fund compliance with the Scheme Advisory Board on good governance recommendations had been deferred due to Covid-19.
    2. The Strategic Finance Manager (Pensions) highlighted the investment core beliefs and Responsible Investment Policy update in December.

     

    RESOLVED:

    The Committee noted the report.      

    Actions/further information to be provided:

    None.

     

25/20

LOCAL BOARD REPORT pdf icon PDF 97 KB

    • Share this item

    In accordance with Fund’s governance objectives in the 2020/21 Business Plan.

     

    NB: Annexe 1 is contained within item 15 as it contains Part 2

    information.

    Additional documents:

    Minutes:

    Witnesses:

    Mr Nick Harrison - Chairman of the Local Pension Board

    Key points raised in the discussion:

    1. The Chairman of the Local Pension Board highlighted the key points raised at the last informal Board meeting in May, highlighting the update from the Assistant Director of Business Operations and the commissioning of a strategic review.
    2. Covid-19 initially posed challenges to the operation of the Pensions Administration team as outlined in the proposed risk register changes, the Pensions Helpdesk remained open and the weekly administration update sent to Board and Committee members was useful.
    3. He noted that the Systems Review Highlight Project within the Service Improvement Plan was a red risk, discussions were being had on whether to remain with current provider and he and the Chairman of the Committee had spoken with Orbis on the project going forward.
    4. Regarding the Key Performance Indicators (KPIs) for Administration Performance, there was concern that the backlog remained.

    RESOLVED:

    The Committee:

    1. Approved the proposed change to the risk register, as noted in the Risk Register section of the report.
    2. Noted the Part 2 minutes of the informal Local Pension Board meeting of 22 May 2020 (included as Annexe 1 – item 15).

               

    Actions/further information to be provided:

    None.

     

26/20

COMPANY ENGAGEMENT AND VOTING pdf icon PDF 169 KB

    • Share this item

    In accordance with Fund’s investment objectives in the 2020/21 Business Plan.

    Minutes:

    Witnesses:

    Mamon Zaman - Senior Pensions Finance Specialist

    David Crum - Minerva

     

    Key points raised in the discussion:

    1. The Senior Pensions Finance Specialist introduced the report noting Robeco’s SDG Framework which identified a company’s impact on the SDGs by analysing what it produces, how and whether the company had been involved in controversies. In 2019, 14 out of 19 engagement themes were linked to a relevant SDG.
    2. A Member queried the internal administrative error within Minerva’s voting services that led to the voting service being switched off without the Fund’s consultation between December 2019 - March 2020 and what the impact was. In response, the representative from Minerva apologised for the error and explained that there was an internal investigation to look into the cause of the error. A possible explanation for the error was that Minerva were working with other LGPS clients moving their assets over to a pool and as that was happening their own voting services were being turned off as the pools took over responsibility for the voting activity.
    3. Once Minerva were notified by the Pension Fund team, the voting service was turned back on again on the 5 April 2020. As part of the investigation, Minerva will provide an analysis on what votes were missed, which would be brought back to the Committee in due course taking into account Covid-19. Going forward, Minerva were liaising with officers on the timetable for the remainder of the Fund’s listed equity assets being moved over to BCPP, to ensure that the future transfer of any voting responsibilities to the pool were properly managed on an agreed basis.
    4. The Chairman noted that the votes missed may have had a minimal impact especially as the peak voting period was March to June. It was explained by Minerva that because of Covid-19 a lot of companies changed the dates of their meetings moving them later in the year.

     

    RESOLVED:

     

    The Committee:

    Reaffirmed that ESG Factors were fundamental to the Fund’s approach, consistent with the Mission Statement through:

    ·         Continuing to enhance its own Responsible Investment Approach, its Company Engagement policy, and SDG alignment with its external provider Minerva Analytics.

    ·         Commending the outcomes achieved for quarter ending 31 March 2020 by Robeco in their Active Ownership approach and the LAPFF in its Engagement with multinational companies as at 31 March 2020.

         

    Actions/further information to be provided:

    The results of Minerva’s internal investigation on why the voting service was switched off between December 2019 - March 2020 will be provided to the Committee in due course.

     

27/20

INVESTMENT CORE BELIEFS AND THE UNITED NATION'S SUSTAINABLE DEVELOPMENT GOALS pdf icon PDF 119 KB

    • Share this item

    In accordance with Fund’s investment and governance objectives in the 2020/21 Business Plan.

     

    Additional documents:

    Minutes:

    Witnesses:

    Neil Mason - Strategic Finance Manager (Pensions)

    David Crum - Minerva

     

    Key points raised in the discussion:

    1. The Strategic Finance Manager (Pensions) introduced the report which identified the Environmental, Social and Governance (ESG) factors as fundamental to the Fund’s approach as highlighted within the Mission Statement agreed on 7 June 2019.
    2. He also noted the Committee’s enhanced focus on Responsible Investment and ESG which were being developed through: the member workshop in November 2019, the sub-group - agreed in December 2019 - which was leading on the development of the Committee’s Core Investment Beliefs and the Fund’s own Responsible Investment Policy in relation to BCPP and other asset managers, the examination of the Spectrum of Capital and finally, the scenario-mapping the Fund’s portfolio in line with the UN’s SDGs. After an invitation to tender in January 2020, Minerva were successful and would lead the scope of work on reviewing the Fund’s investment portfolio holdings and how they align to the SDGs, furthering the commitment to Responsible Investment and ESG.
    3. The Representative from Minerva explained that the project by the Fund regarding the UN SDGs was ground-breaking compared to other LGPS funds and the SDGs were a foundation for the UN’s Transforming our world: the 2030 Agenda for Sustainable Development. Minerva’s draft project plan looked at how the Fund’s existing investment managers viewed sustainability through their policies, voting records and holdings, using the World Benchmarking Alliance SDG 2000 index as the proposed framework.
    4. Discussing Responsible Investment, the Vice-Chairman commented that a robust and comprehensive process was needed to defend the Fund’s rationale for the current Investment Strategy and the actions to be taken. There was no definitive definition of Responsible Investment so the Fund created its own based on the SDGs and the difficulty was the practicality of the project in which Minerva would help to translate the Fund’s general beliefs on Responsible Investment into more specific ones.
    5. A Member was pleased that BCPP’s relationship with Responsible Investment was being examined, especially as the Fund were in the process of pooling with them and it was a good opportunity for the Fund to develop its own Responsible Investment Policy. In response, the Strategic Finance Manager (Pensions) noted the consultations with BCPP’s Responsible Investment lead. The Chairman added that the Surrey Fund was one eleventh within the BCPP providing it with considerable influence, operating through the BCPP Joint Committee.
    6. A Member welcomed the enhanced focus on ESG and Responsible Investment covering a breadth of issues and the objective and transparent development of the Fund’s investment strategy going forward.
    7. The Vice-Chairman stressed that once the Fund’s future investment strategy was clarified, the rules of engagement for the third parties needed to be established. 

     

    RESOLVED:

    1. The Committee noted the report.
    2. Approved the draft project plan from Minerva.         

    Actions/further information to be provided:

    The Committee will help develop the rules of engagement for the third parties in relation to the Fund’s future investment strategy, in line with its commitment to Responsible Investment through ESG  ...  view the full minutes text for item 27/20

28/20

PENSION FUND ACCOUNTS 2019/20 pdf icon PDF 67 KB

    • Share this item

    This report presents the unaudited financial statements of the Pension Fund for the year ended 31 March 2020, in light of the County Council’s obligations as the administering authority under the Local Government Pension Scheme (LGPS) Regulations. The external auditor (Grant Thornton) will then audit the Accounts, with the Fund aiming for an unqualified opinion.

     

    Additional documents:

    Minutes:

    Witnesses:

    Mamon Zaman - Senior Pensions Finance Specialist

    Anna D’Alessandro - Director of Corporate Finance

    Neil Mason - Strategic Finance Manager (Pensions)

     

    Key points raised in the discussion:

    1. The Senior Pensions Finance Specialist introduced the report reminding the Committee that it contained the unaudited financial statements of the Pension Fund for the year ended 31 March 2020, the external auditor Grant Thornton would then audit the Accounts, with the Fund aiming for an unqualified opinion. There was little change from last year, apart from drop in the Fund value as of 31 March due to Covid-19.
    2. The Director of Corporate Finance commended the work of the Pension Fund team in completing the accounts in that timeframe considering the current pandemic. In line with the extension granted by the Ministry of Housing, Communities and Local Government (MHCLG), the original deadline for final accounts of 31 July would not be met due to under-resourcing and the recruitment drive by Grant Thornton who furloughed some of their staff due to Covid-19. It was expected that the final sign-off of the accounts and opinion would be provided in August and a provisional Audit and Governance Committee had been set.
    3. The Strategic Finance Manager (Pensions) thanked a Member for his support on the draft accounts which were published on 31 May.
    4. A Member queried why the external audit costs had doubled in the last year, in response the Senior Pensions Finance Specialist commented that Grant Thornton was expecting more work to be carried out as a result of Covid-19 and the Strategic Finance Manager (Pensions) noted the additional costs due to the changes resulting from the McCloud judgement.

     

    RESOLVED:

    The Committee approved the 2019/20 Pension Fund Accounts, subject to an unqualified opinion issued by Audit.

    Actions/further information to be provided:

    None.

     

29/20

TRAINING POLICY 2020-21 pdf icon PDF 75 KB

    • Share this item

    Surrey Pension Fund recognises the importance of providing appropriate training to both committee members and officers in relation to the operation of the Pension Fund. This report introduces the pension fund training plan within the Training Policy 2020/21 as set out in Annexe 1.

     

    Additional documents:

    Minutes:

    Witnesses:

    Mamon Zaman - Senior Pensions Finance Specialist

    Neil Mason - Strategic Finance Manager (Pensions)

     

    Key points raised in the discussion:

     

    1. The Senior Pensions Finance Specialist noted that the Pension Fund team were awaiting the results of the LGPS National Knowledge Assessment 2020 (NKA) by Hymans Robertson which would feed into Training Policy going forward and the results would be brought back to the Committee in due course.
    2. The Strategic Finance Manager (Pensions) thanked members for their engagement on the NKA as that helped the team identify areas of development for Committee Members, the Policy also considered the enhanced training requirements published with the SAB Good Governance Review in 2019.
    3. The Strategic Finance Manager (Pensions) noted that there were a number of events that members could attend although many had been postponed due to Covid-19. Online training and conferences relevant to members’ needs would continue to be circulated in the weekly updates to Board and Committee members.

     

    RESOLVED:

    1. The Committee approved the Training Policy 2020/21 including the training plan and agreed that all members should prioritise attendance at training events wherever practicable.
    2. Would review this training on an annual basis.          

     

    Actions/further information to be provided:

    The results of the LGPS National Knowledge Assessment 2020 (NKA) by Hymans Robertson will be brought back to the Committee in due course.

     

30/20

CORONAVIRUS RESPONSE INCLUDING MARKET UPDATE pdf icon PDF 109 KB

    • Share this item

    This report provides an update on the Surrey Pension Fund’s (the Fund’s) risk based response to the Coronavirus crisis. It also provides an update on the market outlook and proposed actions that the Fund should take.

     

    NB: Annexes 3 and 4 are contained within item 16 as they contain Part 2

    information.

     

    Additional documents:

    Minutes:

    Witnesses:

    Neil Mason - Strategic Finance Manager (Pensions)

    Nick Weaver - Head of Pensions Administration

    Steve Turner - Investment Consultant (Mercer)

     

    Key points raised in the discussion:

    1. The Strategic Finance Manager (Pensions) introduced the report and noted that the Committee had been provided with the Surrey Pension Fund Coronavirus Plan in March and explained that both the Surrey Pension Fund team and the Pensions Administration team were working from home as a result of Covid-19. The Fund team had adopted agile working beforehand, whilst initially that adjustment was more difficult for the Administration team due to the number of staff involved and the complexity of the operation.
    2. He highlighted the Coronavirus Risk Register which was categorised into the four strategic objectives: Funding, Investment, Governance and Delivery. It was at present reviewed on at least a weekly basis with updates shared initially to the Chairmen of the Committee and the Board. There were no material changes to the risk register over the last month suggesting a move towards business as usual, it would however remain live until the move further into a recovery phase.
    3. The Fund value reached a low in March of £3.8 billion which had recovered to £4.2 billion and Mercer had been commissioned to map the recovery scenarios from an investment perspective.
    4. The Strategic Finance Manager (Pensions) commended the way the Pensions Administration team led by the Head of Pensions Administration had responded to the crisis moving the operation to agile working, the primary job of the Pension Fund was to ensure that members were paid the right amount of benefits and in a timely manner which had been achieved during the pandemic despite the peak in deaths.
    5. In response, the Head of Pensions Administration thanked IT, the Pension Fund team and the Pensions Helpdesk for their support during Covid-19. Minor operational improvements had been made, but more fundamental changes to deliver a better service in line with the identified delivery risks were needed to address the backlog and legacy cases from weak house-keeping in which cases were not closed properly.
    6. A representative from Mercer outlined the Fund’s priority of the topping-up of multi asset credit as part of its standard portfolio rebalancing. The Fund had excess cash available for investments and discussions were being had about where to invest in, one option was yield credit spreads which were a key asset for Western Multi-Asset Credit and were at a current high. The Strategic Finance Manager added that the Fund team were comfortable that excess cash could be invested after having undertaken a risk assessment on the impact to the employer base.

     

    RESOLVED:

     

    The Committee:

    1. Noted the Surrey Pension Fund Coronavirus Plan.
    2. Noted the Surrey Pension Fund Coronavirus Risk Register.
    3. Noted the Investment Market Update provided by Mercer and approved the following recommendations:

    ·         Continue with the key strategic changes to the portfolio approved by the pension fund committee, at its meeting of 13 September 2019;

    ·         Prioritise topping up multi asset credit as part of standard portfolio rebalancing;

    ·         Continue  ...  view the full minutes text for item 30/20

31/20

CASH-FLOW ANALYSIS pdf icon PDF 96 KB

    • Share this item

    In accordance with Fund’s funding objectives in the 2020/21 Business Plan.

     

    NB: Annexe 1 is contained within item 17 as it contains Part 2

    information.

    Minutes:

    Witnesses:                                       

    Ayaz Malik - Pensions Finance Specialist

    Mr Nick Harrison - Chairman of the Local Pension Board

    Steve Turner - Investment Consultant (Mercer)

     

    Key points raised in the discussion:

     

    1. The Pensions Finance Specialist noted that there was a positive cash-flow for the quarter which was significantly increased from the previous quarter mainly due to employers paying their deficit contributions at the year-end and when carrying out year-end reconciliation, cash was allocated from the holding account.
    2. He commented that the membership trend had increased in line with the 2016 valuation. In response the Chairman of the Local Pension Board queried the apparent drop in the total pension benefits paid in quarter 4 compared to the previous one, despite the increased membership – officers would look into the matter.
    3. Mercer had undertaken a Cashflow Review and the representative explained that their key conclusion was that the Fund was in a strong cash-flow position as a result of the strategic asset allocation changes; especially compared to other LGPS funds who were cash-flow negative or neutral. In response the Chairman commented that those changes agreed by the Committee in September 2019, were likely to improve the long-term income potential to the order of £40 million annually.

    RESOLVED:

    1. The Committee noted the cash-flow position for quarters three and four.
    2. Noted the total cash-flow report from Mercer and approves the following:

    ·         No change is required to the investment or funding strategy as result of the current cash-flow position.

    ·         Future drawdowns should focus cash from contributions (and any asset income) in the first instance. The diversified growth fund allocation earmarked for removal should then be used.

     

    Actions/further information to be provided:

    Officers will investigate why there was a decrease in the total pension benefits paid in quarter 4 despite the increased membership compared to quarter 3.  

     

     

     

32/20

INVESTMENT MANAGER ISSUES AND PERFORMANCE AND ASSET/LIABILITIES UPDATE pdf icon PDF 1 MB

    • Share this item

    In accordance with Fund’s investment objectives in the 2020/21 Business Plan.

     

    NB: Annexes 2 and 3 are contained within item 18 as they contain Part 2 information.

    Additional documents:

    Minutes:

    Witnesses:

     

    Mamon Zaman - Senior Pensions Finance Specialist

    Anthony Fletcher - Independent Advisor (MJ Hudson)

     

    Key points raised in the discussion:

    1. The Chairman highlighted that page 144 had been amended and circulated to the Committee, regarding the Fund Performance - Summary of Quarterly Results graph - to be attached to the minutes.
    2. The Senior Pensions Finance Specialist noted that the Fund value had decreased as of 31 March and had subsequently bounced back.
    3. The Chairman commented that the funding level was down to 93% as noted in the report and at present would most likely now be just over 100% consistent with the volatility in the stock markets.
    4. The Independent Advisor commented that the work on cash-flow was important as excess cash acted as a buffer during market volatility. He endorsed the Committee’s decision to increase the Fund’s exposure to Western Multi-Asset Credit.

    RESOLVED:

    1. The Committee noted the main findings of the report, the Fund’s 3 year annualised performance return for the period ending 31 March 2020 was -0.8% against its target return of 0.6%. The funding level as at 31 March 2020 was 93%.
    2. Approved an additional allocation of the Fund’s internal cash into Western MAC.   

     

    Actions/further information to be provided:

    The amended page 144 regarding the Fund Performance - Summary of Quarterly Results graph will be attached to the published minutes.

     

     

33/20

EXCLUSION OF THE PUBLIC

    • Share this item

    That under Section 100(A) of the Local Government Act 1972, the public be excluded from the meeting for the following items of business on the grounds that they involve the likely disclosure of exempt information under the relevant paragraphs of Part 3 of Schedule 12A of the Act.

    Minutes:

    RESOLVED:

     

    That under Section 100(A) of the Local Government Act 1972, the public be excluded from the meeting for the following items of business on the grounds that they involve the likely disclosure of exempt information under the relevant paragraphs of Part 3 of Schedule 12A of the Act.

     

    The meeting was adjourned at 11:34 am

     

    It was reconvened at 11:40 am

     

     

34/20

LOCAL BOARD REPORT

    In accordance with Fund’s governance objectives in the 2020/21 Business Plan.

     

    Confidential: Not for publication under Paragraph 3

    Information relating to the financial or business affairs of any particular person (including the authority holding that information)

     

    NB: Annexe 1 is the Part 2 annexe to item 6.

    Minutes:

    Witnesses:

    Mr Nick Harrison - Chairman of the Local Pension Board

    Anna D’Alessandro - Director of Corporate Finance

    Neil Mason - Strategic Finance Manager (Pensions)

    Nick Weaver - Head of Pensions Administration

     

    Key points raised in the discussion:

    1. The Chairmen of the Local Pension Board and Pension Fund Committee thanked the Head of Pensions Administration for his thorough work over the interim period. The Director of Corporate Finance echoed the thanks to the Head of Pensions Administrations, praising his transparent and systematic approach which uncovered a multiplicity of issues in the service - it was key to fix the foundations first before moving forward with other projects.
    2. The Strategic Finance Manager (Pensions) commented on the strategic review which was commissioned by an independent lead to look at all aspects of Pensions Administration, the Chairmen had been consulted and the results of the review would be available shortly.
    3. The Head of Pensions Administration explained that the Service Improvement Plan had all the correct components, there was no need to change the current system only to ensure a compliant and consistent service going forward  - as the past small incremental changes and weak house-keeping helped create the legacy issues.
    4. The Chairman of the Local Pension Board positively noted the reassuringly low level of complaints from members, the majority of the backlog and issues was a result of the system processes and cases not being closed down properly.
    5. The Strategic Finance Manager (Pensions) praised the work of the Board on ensuring transparency within Pensions Administration going forward. 
    6. The Chairman of the Local Pension Board noted that despite Covid-19, Pensions Administration were in a good position to get the Annual Benefit Statements out in a timely way. In response, the Chairman of the Committee noted the assurance from the Fund Actuary, Hymans Robertson, who were confident that they are valuing the correct benefits being paid out to members. The legacy issues did not materially affect the Fund valuation.

     

    RESOLVED:

    The Pension Fund Committee noted the Part 2 Annexe 1.

    Actions/further information to be provided:

    None.

     

35/20

CORONAVIRUS RESPONSE INCLUDING MARKET UPDATE

    This report provides an update on the Surrey Pension Fund’s (the Fund’s) risk based response to the Coronavirus crisis. It also provides an update on the market outlook and proposed actions that the Fund should take.

     

    Confidential: Not for publication under Paragraph 3

    Information relating to the financial or business affairs of any particular person (including the authority holding that information)

     

    NB: Annexes 3 and 4 are the Part 2 annexes to item 11.

     

    Additional documents:

    Minutes:

    Witnesses:

    Steve Turner - Investment Consultant (Mercer)

    Neil Mason - Strategic Finance Manager (Pensions)

     

    Key points raised in the discussion:

     

    1. The Investment Consultant highlighted the initial market fall in March due to Covid-19 and the subsequent bounce back, noting the possible shapes of economic recovery and what that meant for asset classes going forward.
    2. There was no reason for the Fund to depart from its long term strategy and the strategic asset allocation changes agreed in 2019 were still supported including the introduction of private market assets such as infrastructure and debt which took time to mature. Shorter term focus areas were that the Fund should actively monitor liquidity and cash-flow requirements, top-up its allocation for MAC, review its gilt allocation and consider having more specific target allocations to UK and global property as a result of being part of the BCPP pool.
    3. Mercer reviewed the ‘alphabet’ economic recovery V, W, U and L shapes in relation to GDP, noting the higher likelihood of the W-shape recovery scenario due to the risk of the comeback of Covid-19 after lockdown had eased and having to re-enter the lockdown restrictions, which would likely lead to a fall in equity and credit markets.
    4. The Strategic Finance Manager (Pensions) informed the Committee that the Fund Actuary’s model worked on five-thousand different scenarios including those considered by Mercer and the Pension Fund team did not believe that Covid-19 would cause a deviation from the investment and funding strategy.
    5. A Member queried the impact on property as a result of the pandemic, in response the Investment Consultant agreed that property was one asset class with the most uncertainty regarding changes to future values and rental income, yet should still be more attractive on an income basis compared to gilt yields.

     

    RESOLVED:

    The Pension Fund Committee noted the Part 2 Annexes 3 and 4.

    Actions/further information to be provided:

    None.

     

36/20

CASH-FLOW ANALYSIS

    In accordance with Fund’s funding objectives in the 2020/21 Business Plan.

     

    Confidential: Not for publication under Paragraph 3

    Information relating to the financial or business affairs of any particular person (including the authority holding that information)

     

    NB: Annexe 1 is the Part 2 annexe to item 12.

     

    Minutes:

    Witnesses:

    Ross Palmer - Investment Consultant (Mercer)

    Neil Mason - Strategic Finance Manager (Pensions)

     

    Key points raised in the discussion:

     

    1. The Investment Consultant explained that Mercer’s review focused on the Fund’s expected cash-flow position over the next three years up to the conclusion of the 2022 Actuarial Valuation, due to the most visibility over the contributions - the Fund was expected to be cash-flow positive by c.£20 million annually.
    2. Mercer had reviewed the Fund’s investment strategy from an income perspective looking at the existing asset classes as well as the new classes being added, in order to assess the Fund’s future income potential. The new allocations for infrastructure and private debt were expected to raise the income potential by around £40 million annually, once the allocations had been ramped up to the targets (which is expected to take several years).
    3. The Strategic Manager (Pensions) highlighted that income returns on private debt did not have the classic j-curve like other private market asset classes, meaning income returns were faster.

     

    RESOLVED:

    The Pension Fund Committee noted the Part 2 Annexe 1.

    Actions/further information to be provided:

    None.

     

37/20

INVESTMENT MANAGER ISSUES AND PERFORMANCE AND ASSET/LIABILITIES UPDATE

    In accordance with Fund’s investment objectives in the 2020/21 Business

    Plan.

     

    Confidential: Not for publication under Paragraph 3

    Information relating to the financial or business affairs of any particular person (including the authority holding that information)

     

    NB: Annexes 2 and 3 are the Part 2 annexes to item 13.

    Additional documents:

    Minutes:

    Witnesses:

     

    Mr Nick Harrison - Chairman of the Local Pension Board

    Anthony Fletcher - Independent Advisor (MJ Hudson)

    Neil Mason - Strategic Finance Manager (Pensions)

     

    Key points raised in the discussion:

     

    1. The Chairman of the Local Pension Board urged caution in investing in property as the Fund was above the central allocation. In response, the Independent Advisor noted the equity markets fell dramatically as a result of Covid-19 but had re-balanced - reminding the Committee that benefits from property investment were reaped over the long term.
    2. The Strategic Finance Manager (Pensions) commented that as part of the strategic asset allocation review, additional allocation would be made to property in the future and he noted that the Committee would receive an update at the next meeting.

     

    RESOLVED:

    To note the Part 2 Annexes 2 and 3.

    Actions/further information to be provided:

    None.

     

38/20

BORDER TO COAST UPDATE

    In accordance with Fund’s investment objectives in the 2020/21 Business Plan.

     

    Confidential: Not for publication under Paragraph 3

    Information relating to the financial or business affairs of any particular person (including the authority holding that information)

     

    Additional documents:

    Minutes:

    Witnesses:

    Neil Mason - Strategic Finance Manager (Pensions)

     

    Key points raised in the discussion:

    1. The Strategic Finance Manager (Pensions) introduced the report summarising that the purpose was to reflect on how BCPP was impacted by Covid-19 including the contingency measures taken.
    2. The Strategic Finance Manager (Pensions) pointed out that there were now eleven partner funds within BCPP due to the merger between Northumberland County Council and South Tyneside Council pension funds.

     

    RESOLVED:

     

    The Pension Fund Committee agreed the recommendations outlined in the Part 2 report.

     

    Actions/further information to be provided:

    None.

     

39/20

PUBLICITY OF PART 2 ITEMS

    • Share this item

    To consider whether the item considered under Part 2 of the agenda should be made available to the Press and public.

    Minutes:

    The Committee agreed that no confidential information within items considered under Part 2 of the agenda should be made available to the Press and public.

     

     

40/20

DATE OF NEXT MEETING

    • Share this item

    The next meeting of the Surrey Pension Fund Committee will be on 4 September 2020.

    Minutes:

    It was agreed that the next meeting of the Surrey Pension Fund Committee would take place on 4 September 2020.  

     

    Subsequent to the meeting the next Committee meeting has been scheduled for 11 September 2020.

     

 

  • Updated: 03 Dec 2020

Top