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Confidential: Not for publication under Paragraph 3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)
Declarations of interest:
Neil Mason - Strategic Finance Manager (Pensions)
Steve Turner and Ross Palmer, Mercer
Key points raised during the discussion:
1. Members considered this Part 2 report that reviewed the Fund’s current Investment Strategy, in line with current progress made within BCPP’s asset offerings, as well as taking account of its current Fund Managers’ performance returns, since inception. This report developed the approvals of the Pension Fund Committee at its meetings of 12 September 2019 and 12 June 2020.
2. The recommendations were discussed in detail and agreed.
3. With regards to Annex 1, Mercer noted the long term strategy for property and was not envisaging any new changes in the next 12-18 months due to the structural difficulties as a result of Covid-19 with the UK market reliant on the affected high street, retail, leisure, hotels and office sectors; an increase in the property allocation to global markets to 50% of the property portfolio would address that as the US/EU markets were exposed to residential areas – less affected by the pandemic.
4. It was noted that at the last year’s strategy review the Committee agreed to material changes. Mercer explained that those assets would be sourced from the Fund’s listed equity and Diversified Growth Fund (DGF) and would take 3-5 years to be drawn down; therefore the Investment Consultant sets out proposals for exploring liquid alternative asset classes in the interim as ‘warehousing’ investments. The Investment Consultant suggested the use of listed private equity and listed infrastructure, for example companies listed on stock exchanges/passive vehicle by Legal and General (LGIM); as well as global loans, for example funds that invest in bank loans to corporations looking to expand businesses within secondary markets. As passive vehicles do not exist for loans an active manager search would be needed, linking in with BCPP. To do this successfully the routes must be consistent with pooling.
5. The Committee discussed in detail the information provided on gilts in Annex 4 to the report.
6. It was reported that the view from the property session, held with Paul Campbell, was the need for flexibility in the future particularly concerning property in respect of the new real asset class and long lease property was to be explored as likely to be delivered outside of the BCPP property portfolio.
7. The Strategic Finance Manager reported that it was likely the Committee would receive a report on the recommended direction of travel at the next Committee meeting in December.
1. That the increase in property allocation to global property assets to 50% of the property portfolio was approved.
2. That officers be authorised to work with the independent advisor, investment consultant and Border to Coast to explore a solution incorporating liquid alternatives as a proxy for the allocation to private market assets, while the transition to private market assets is incomplete.
3. That officers be authorised to work with the independent advisor, investment consultant and Border to Coast to explore a solution as a proxy for the target equity portfolio, while the transition to this target asset allocation is in build with Border to Coast.
4. That officers be authorised to work with the independent advisor, investment consultant and Border to Coast to explore alternatives to the gilts segment of the portfolio.
Reason for decision:
As part of the Fund’s 2019 Investment Strategy Review, the Pension Fund Committee had agreed changes to the asset allocation (detail below) at its meetings on 12 September 2019 and 12 June 2020. As this was partly dependent on product offerings being available by Border to Coast Pensions Partnership (BCPP), the Fund will now explore options to move into its newly agreed asset allocation in the interim, while those products are being developed. The Purpose of this is to minimise risk and maximise returns through its asset allocation.