There were no apologies.

Cllr Gareth Allatt declared an interest by virtue of having a self-invest personal pension with Fidelity.

Cllr Christopher Marlow also declared an interest as an employee of Prudential plc.

The minutes were agreed.

In accordance with the Council’s Constitution, questions that are not specific to reports on the agenda must have been received in writing 10 working days before the date of the meeting. 

Questions specifically relating to reports on the agenda should be received within two working days of the normal publication date of the agenda. Please ensure that questions specifically on reports on the agenda are received by the Democratic Services Team by 5pm on Thursday 9^th May 2019.

There were no questions.

Mr Mike O’Donnell (LCIV Chief Executive Officer) and Mr Kevin Cullen (LCIV Client Relations Director) attended to update on a number of LCIV matters and respond to questions/comments. A printed slide presentation handed to Members formed the basis of LCIV commentary.

Assets to the value of £18bn are now under LCIV oversight, including Legal and General Investment Management (LGIM) funds and Blackrock passive funds. LCIV also have 14 active sub-funds and the presentation reported that over 50% of London’s assets are now pooled. A Quarter 2 London Local Authorities (LLA) Investment Forum would also take place on 6^th June 2019 and consultation is in progress concerning a Service Level Agreement (SLA) with each LLA. An organisation chart for the LCIV outlined a current staffing structure including details of vacant posts.

The presentation also outlined the LCIV’s governance structure and oversight arrangements. The LCIV Board provides independent oversight acting in the interest of all LCIV shareholders (comprising three executive and seven independent non-executive directors and one independent chair). External independent oversight is provided by: the Financial Conduct Authority (approving persons, permissions for business and prospectus approval); the Depositary (providing independent oversight of assets to protect investors’ interests); and Auditors (auditing the LCIV company and ACS pooling vehicle). Government oversight is provided by the Ministry of Housing, Communities and Local Government (looking at progress against pooling criteria). 

Details of the current LCIV fund offering were also provided. These comprised a fund for UK equities, six funds for global equities, a fund for emerging market equities, four multi-asset funds, and two fixed income funds. Total Assets under Management (AUM) for the funds amounted to £8.2bn. Details were also provided of a further 14 fund products being planned for launch and their progress. Future launch of four of the products (Private Equity, Global Equity Blend, Active Credit Blend and UK Credit) is subject to demand in the selected strategy.

Starting his presentation, Mr O’Donnell congratulated L B Bromley on achieving its nationally recognised performance awards. Mr O’Donnell had completed just over two months as CEO with previous experience including Director level finance responsibility in Local Government and previous involvement in establishing the LCIV.

The LCIV aimed to add value to London boroughs and help boroughs meet their pooling requirements. With pooling mandatory, Mr O’Donnell looked to help facilitate a response to the requirement.

New LCIV governance arrangements were introduced last autumn in response to the earlier Willis Towers Watson review of LCIV governance and Mr O’Donnell outlined the LCIV’s position on matters of concern for L B Bromley.

Remuneration Policy

This is being reviewed by the LCIV and a number of boroughs are concerned about LGPS provision for LCIV staff. Ongoing LGPS membership will be looked at and Mr O’Donnell referred to pension fund options. New joiners subsequently promoted to salaries over £120k will not be entitled to LGPS membership; it is necessary to bring forward the review and report to the LCIV Shareholders Committee this summer.

LCIV Chair

The term of the  ...  view the full minutes text for item 5.

The Chairman had no update for Part 1 of the agenda.

In updating the Sub-Committee, the Director of Finance highlighted a number of matters including those summarised below.

Local Government Pension Scheme: Fair Deal – Strengthening pension protection - Policy consultation

The Government had sought views on proposals to make amendments to the LGPS in England and Wales requiring service providers to offer LGPS membership to individuals who have been compulsorily transferred from an LGPS employer. The proposed reforms would mean that independent providers no longer have the option of providing transferred staff access to a broadly comparable scheme. Instead, employees would always have continued access to the LGPS.

A L B Bromley response had been sent to the Ministry of Housing, Communities and Local Government (copy at Appendix A for information).  The requirement would be a disincentive to businesses looking to compete for outsourced Council services. The requirement would, in effect, mean the LGPS being transferred to an independent provider who would then become an admitted body to a local Fund. The requirement, and a provider having to take on LGPS liabilities, is not sustainable in the longer term. 

Changes to the Valuation Cycle and Management of Employer Risk

Within this Government consultation is an intention to change the LGPS valuation cycle from three to four years, bringing the cycle in line with other Public Sector schemes. The consultation also refers to reviewing the risk that employers have in LGPS pension funds and looking at how this is assessed and managed. Currently, when a last remaining member retires it is necessary for an admitted organisation to pay the Council a cessation fee to represent liabilities to the Council. However, what would not be welcome is Councils having to accept such a liability when an organisation goes out of business.

L B Bromley Pension Fund Audit Plan Report for 2018/19

The Director advised Members that the External Auditors will report to the Audit Sub-Committee on planning arrangements for the 2018-19 audit of the Fund.

Local Pension Board (LPB) Membership

For the LPB member representative vacancy, a nomination for appointment would be considered at the General Purpose and Licensing (GP&L) Committee meeting on 16^th May 2019. (Democratic Services Note: Lesley Rickards and Vinit Shukle were appointed by GP&L Committee on 16^th May 2019 as LPB member representatives for a four-year period from 1^st July 2019 and Emma Downie and Pinny Borg were appointed by Full Council on 22^nd May 2019 as LPB employer representatives for a four-year period from 1^st July 2019).

McCloud judgement

This relates totransitional protections given to scheme members in the judges and firefighters schemes as part of public service pensions reform who in 2012 were within 10 years of their normal retirement age. Tapered protections were provided for those 3-4 years younger. On 20th December 2018 the Court of Appeal found that these protections were unlawful on the grounds of age discrimination and could not be justified.

In all public service schemes, protections were applied to  ...  view the full minutes text for item 7.

Report FSD19060

The market value of the Fund ended the March quarter at £1,039.2m (£963.7m at 31^st December). A detailed report from MJ Hudson Allenbridge on fund manager performance for the quarter was appended to Report FSD19060 as was historic data on the Fund’s value.

With market conditions positive in Q4, particularly for equities, the total Bromley fund return was +8.68% against a +6.60% benchmark exceeding the Q3 fall. Nevertheless, the Fund’s annual return of +7.99% was slightly below the +8.27% benchmark. Details of individual fund manager performance against their benchmarks for the quarter, year to date, 1, 3 and 5 years and since inception were also appended to Report FSD19060.

The Fund’s medium and long-term returns have remained very strong overall underlining a consistently strong Fund performance over a long period. In addition to winning the LGPS Investment Performance of the Year in 2017, the LGPS Fund of the Year (assets under £2.5bn) in 2018, L B Bromley also recently won the Pensions, Treasury and Asset Management Award at CIPFA’s Public Finance Awards 2019.

Concerning a previous recommendation to invest the balance of the Blackrock Global Equities fund in a Fixed Income fund following implementation of the revised Asset Allocation Strategy (less a sum to meet the cash shortfall during 2017/18), a Multi-Asset Credit fund was subsequently suggested as an alternative to Fixed Income. MJ Hudson Allenbridge was asked to provide further details and their report on the matter was also appended to Report FSD19060.

With a £2.1m cash surplus generated during 2018/19 (excluding reinvested income), a reduced sum of £1.8m is now required to meet the Fund’s cash deficit at 31^st March 2019, leaving a sum of around £9.6m to be invested in a new fund (see below). A further appendix to Report FSD19060 outlined detailsof early retirements.

On admission agreements for outsourced services, Mytime Active ceased as an admission body on 31st March 2019 with four active members remaining in the scheme. The cessation debt and deficit repayment plan are being finalised for agreement by the Director of Finance, in consultation with the Chairman and Chairman of the General Purposes & Licensing Committee under delegated authority from that Committee. Additionally, the actuaries are considering a transfer payment for GS Plus and the Sub-Committee would be updated in due course.

Future Fund Manager attendance at Sub-Committee meetings, was scheduled as follows:

·  24th July 2019 – Fidelity (fixed income, multi-asset income and property)

·  27th August 2019 – Schroders (multi-asset income)

·  3rd December 2019 – Baillie Gifford (global equities and fixed income)

·  3rd January 2020 – MFS (global equities)

·  13th February 2020 – Fidelity (fixed income, multi-asset income and property).

Final outturn details for the 2017/18 Pension Fund Revenue Account and the provisional outturn for 2018/19 were also appended to Report FSD19060 along with Fund membership numbers.

Mr Arthur provided a brief commentary on global economic and market conditions for Q4 2018/19 drawing comparison to how market conditions  ...  view the full minutes text for item 8.

Printed copies of reports from certain Fund Managers are circulated to Sub-Committee Members with this agenda. Remaining reports will be circulated as soon as possible.

Representatives of MFS will be attending the meeting for this item. 

MFS reported on the performance of their Global Value Equity Fund for L B Bromley. MFS were represented for the item by their Investment Product Specialist Director and their Relationship Management Director.

Providing a 12 month performance overview to 31^st March 2019, an executive summary showed performance over one year, three years, five years, and since inception (18th December 2013). Over three years, five years and since inception, gross performance has been in excess of 13% with net performance for the same periods over 12%. One-year performance was a little less at 11.35% gross and 10.87% net against an MSCI World Index (net div) of 11.98%. Detractors for the one-year performance review were stock selection in information technology, consumer staples and energy along with an overweight position to financials. Stock selection in industrials and materials contributed to performance. A subsequent slide highlighted performance results as of 31^st March 2019, (gross and net of fees GBP), relative to the MSCI World Index (net div) covering: 2018/19 quarterly returns; annual returns for each year since 2016 (including 2019 year to date); and annualised returns for the periods of 1 year, 3 years, 5 years and since inception. An analysis was also presented of historic relative outperformance between July 2003 and March 2019 over rolling 10, 7, 5 and 3 year periods against the MSCI World Index (net div). MFS tended to outperform in falling markets. In terms of historical relative performance in diverse markets, the number of outperforming quarters exceeds the number of underperforming quarters between July 2003 and March 2019.

The MFS presentation also included content on their investment approach where an emphasis is placed on valuation and business durability to exploit market inefficiencies. Further reference was made to Global Value and Growth Valuations and performance drivers of sectors showing top contributors and top detractors. Another slide indicated certain big name stocks that MFS would not be inclined to invest in with data to show why this should be the case. An investment case study in this regard was provided on Apple where comments were made on what there is to admire about the company but also reasons why MFS feel it is necessary to be cautious. Specific performance drivers in stocks were also highlighted with the names of top contributors and top detractors provided. Additionally, an investment case study was provided on Diageo with key points highlighted focusing on the long term compounding power of the business. Companies such as IT consultancies were considered by MFS to be more durable.

Details were also provided of significant transactions by MFS from 1^st April 2018 to 31^st March 2019 comprising securities purchased and securities sold. A further investment case study was provided on Accenture with a subsequent slide showing sector weights relative to the MSCI World Index. This indicated the percentage of MFS investment per sector as at 31^st March 2019 and the benchmark for each sector along with the percentage of underweight/ overweight exposure in each  ...  view the full minutes text for item 9.

Members received the exempt minutes which the Chairman signed on conclusion of the meeting.

Following the LCIV’s presentation to the Sub-Committee and subsequent discussion at item 4a, Members and the Director of Finance had a brief internal discussion under Part 2 proceedings without LCIV representatives present.

Under Part 2 proceedings, the Chairman reported to Members on certain recent matters.

The Director had no update on matters under Part 2 proceedings.