Agenda item

The report updates Pension Committee on the Fund’s Investments and current Funding position for the quarter to 30 June 2024.

The report provides an update on the Fund’s performance for the quarter to 30 June 2024.  The report falls into four parts.  Section 1 addresses performance against strategic goals.  Section 2 considers the asset allocation strategy and how that is being applied, specifically current and planned investments.  Section 3 deals with risk management and section 4 summarises updates from any recent investment manager meetings.

The Head of Pensions and Treasury introduced the item and explained that

Pension fund increased by just under £48 million and returned 1.87% over the quarter.

The Head of Pensions and Treasury informed the Committee that the assumption in the valuation stated that the fund assumed to return 9.2%, the fund had now returned 10.4% since the valuation date which meant that they had a positive effect in terms of the funding level.

The Head of Pensions and Treasury stated that officers had updated the Hyman's tool that they used to track the funding level, at the end of March the funding level was at 126% and at the end of June it stood at 132% percent. It would currently require an asset return of 4.3% to be 100% funded.

The Head of Pensions and Treasury explained that in April they moved £100 million from the LGIM Global equity fund to the LCIV Multi Asset Credit fund, this went smoothly, and officers had now rebalanced the portfolio.

The Head of Pensions and Treasury informed the Committee that they were closer to their balance target allocation in terms of fixed interest, they stood just below 20% and the target allocation was 23%.

The Head of Pensions and Treasury stated that at the last committee meeting they agreed to transfer the Aberdeen Standard Life corporate bond holdings and the Wellington corporate bond holdings to the new LCIV All Maturities Credit Fund, the launch of this fund was delayed, and the launch was now set to take place on the 9th October, so those funds would be moved across.

The Head of Pensions and Treasury stated that following discussion during the last Committee meeting about employing a transition manager, officers looked at the underlying holdings in the Wellington Fund and the underlying holdings in the Standard Life Corporate Bond Fund and found that there wasn't enough crossover to warrant the transition. The Head of Pensions and Treasury stated that officers decided that the best option is just to sell down those assets and invest in the new fund.

The Head of Pensions and Treasury explained that by going into the funds on the launch date, they would save on the dilution levy that the LCIV applied, which would save on costs.

The Head of Pensions and Treasury informed the Committee that whilst they had agreed to transfer across the Absolute Return Fund across over a year ago, officers had delayed the transfer because the fund had performed better than the other bond funds over the past year. The Head of Pensions and Treasury stated that they would now be looking to move the fund across in stages with a target date of the 31st of March 2025, which was in line with the government's expectations and ahead of a lot of other funds.

The Head of Pensions and Treasury informed the Committee that he had a meeting with Access Capital Partners on the 6th November, and as he knew Committee were keen to go out and meet the fund managers again he offered an open invitation to Committee Members.

Resolved:

1.1  To note the contents of the report.