Agenda and minutes

Apologies were received from Cllr Richard Williams and from Jane Harding as a member of the Local Pension Board.

There were no declarations of interest.

The minutes were agreed.

The Director of Finance also updated Members on developments concerning the Mears scheme. The position looked promising following a recent meeting with financiers. Should necessary legal and financial considerations be finalised it was intended to have the scheme in place from April 2016. Upon a vote, Members agreed that the 2017/18 fund valuation should fully reflect the gifting of the scheme to the L B Bromley Pension Fund.

Members also considered a fluctuating fund performance; L B Bromley was ranked in the 100^th percentile and 66^th percentile for the June and September 2015 quarters respectively with a significantly higher ranking expected for the December quarter. The fund had traditionally retained a high proportion of equities with consequent volatility. Long term equities had served the fund well. As an alternative to widely performing equities, equities investment for a solid income was suggested. Consideration would be given to reasons for a decreasing equities income but given the fund’s liabilities to deferred and current pensioners, a Member advised against moving away from the current approach. This would ensure that returns continue to be maximised and provided faster for the fund.

In accordance with the Council’s Constitution, questions to this Committee must be received in writing four working days before the date of the meeting. Therefore please ensure that questions are received by the Democratic Services Team by 5pm on Friday 5^th February 2016.

There were no questions.

Report FSD16019

Members were updated on Government proposals for Local Government pension scheme reform and pooling options, each pool being expected to have at least £25bn of scheme assets. Within a pool, authorities would retain decision making on investment strategy and asset allocation along with funding responsibilities for current and past deficit contributions; the pool would manage fund investments and manager selection using an authority’s asset allocation. A pool would be accountable to an authority for any poor investment decision. A limited number of investments could also be outside of a pool e.g. direct property investments. 

Initial proposals from administering authorities were to be submitted to Government by 19^th February 2016 with final submissions expected by 15^th July 2016. A final pooling arrangement was expected to “go live” by April 2018.

Two pools being explored at L B Bromley were ACCESS, “a Collaboration of Central, Eastern and Southern Shires” (with a potential value of £38bn) and the London Collective Investment Vehicle (CIV), currently comprising London Boroughs (with a potential value of £24bn). 

Currently at an early formation stage, ACCESSincluded authorities having a similar investment approach to L B Bromley with a heavy reliance on external fund managers. L B Bromley would have the second lowest fund value if part of ACCESS.  ACCESS would enable participating authorities to benefit from pooled investments, preserve the best aspects of local practice, and maintain a desired level of local decision making/control. It would also provide a range of asset types so that participating authorities can execute locally decided investment strategies as far as possible.

The London CIV was now established and operational. It comprised the City of London and 30 London Boroughs with another London borough expected to join shortly. By the end of 2016 it was estimated to deliver £3m savings in fund fees from £6bn of assets, with an ambition to deliver fund management savings of £30m per annum by 2020.

To help determine the best pool to join, the Director of Finance was liaising with the Chairman, Vice Chairman and Resources Portfolio Holder. Separate meetings were also being arranged with L B Wandsworth (on their London CIV experience) and Kent County Council (concerning their progress with ACCESS). Pooling could potentially deliver cost savings through scale, increased resilience, knowledge sharing, and robust governance/decision making without compromising a Council’s sovereignty. Individual pension funds would retain separate identities and local accountability; pooling could also provide access to opportunities not available to individual funds with greater benefits being gained from some asset types such as infrastructure. Net savings would be realised in the medium and longer term, particularly from investment fees but initial costs would be necessary to establish a pooled arrangement and associated transition costs. 

In discussion there was concern that L B Bromley would have to subsidise poorly performing funds in a pooled arrangement along with scepticism on fee reductions and a large enough return being obtained from any infrastructure investment.

It was confirmed that deficits and asset allocation strategy  ...  view the full minutes text for item 27.

Report FSD16014

Summary details were provided of the investment performance of Bromley’s Pension Fund for the third quarter of 2015/16 along with information on general financial and membership trends of the Pension Fund and summarised information on early retirements.

AllenbridgeEpic provided further detail on investment performance and Baillie Gifford provided commentary on its third quarter performance, future economic outlook, and recent developments in financial markets.

The market value of the Fund ended the December quarter at £732.0m (£684.4m as at 30^th September 2015) but as of 26^th January 2016 it had fallen to £701.5m. The comparable value as at 31^st December 2014 was £693.7m.

Overall, the total fund returned +6.9% (net of fees) in the latest quarter, compared to the benchmark return of +5.7%. Local authority average rankings for the December quarter were not available for the report. The Fund’s medium and long-term returns remained particularly strong.

Concerning admission agreements for outsourced services, an update was provided at the Sub-Committee’s previous meeting and Report FSD16014 advised of no significant developments since. Further updates would be provided in future quarterly performance reports.

RESOLVED that:

(1)  the report be noted; and

(2) the position regarding admission agreements for outsourced services be noted as set out in paragraphs 3.11 to 3.12 of Report FSD16014.

Printed copies of reports from the Council’s Fund Managers are circulated to Sub-Committee Members with this agenda (please note that the Fund Manager’s report from MFS will follow). Representatives of Fidelity and Standard Life will be attending the meeting for this item.

Members received presentations from representatives of Fidelity and Standard Life . Copies of quarterly reports from all of the Council’s Fund Managers had been circulated to Members in advance of the meeting.

Fidelity’s presentation concerned performance of the company’s UK Aggregate Bond Fund (fixed income). Although a volatile year, the fund outperformed its index (benchmark) over the review period. It was agreed that future presentations would highlight gross and net figures.

Standard Life’s presentation concerned the performance of its Global Absolute Return Strategies (Diversified Growth).  

The exempt minutes were agreed.

The Chairman also thanked Mr Martin Reeves, Principal Accountant, Finance for his service over many years advising the Sub-Committee. Mr Reeves would be retiring from the Council’s service in March 2016.