Apologies for absence were received from the Chairman, Cllr Keith Onslow, and the Vice-Chairman, Cllr Gareth Allatt, took the chair.

There were no declarations of interest.

Questions specifically relating to reports on the agenda may 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 Friday 24^th January 2020.

Two questions had been received from Gill Slater - the questions and replies are set out in Appendix A to these minutes.

RESOLVED that the minutes of the meetings held on 3^rd December 2019 (excluding exempt information) and 17^th December 2019 be confirmed.

Report FSD20023

As requested at its last meeting, the Sub-Committee received a follow-up report from MJ Hudson Allenbridge presenting further information and options for the future asset allocation strategy for the Pension Fund on the choice between investing in International Property Funds and in US Property Funds for the as yet unallocated 5% remaining.

John Arthur of MJ Hudson Allenbridge attended the meeting to brief the Sub-Committee. He reminded Members that the aim was to manage risk, and drew attention to the efficient frontier chart on page 3 of the report. He recommended investing in international property, rather than US property, which gave wider diversification. He explained the broad categories of property fund set out in the report – in particular Core, Core-Plus, Value-Add and Opportunistic – and suggested a Value-Add approach which, although involving more risk, would allow fund managers to invest where they saw the most value. He did not recommend investing in US or international REITS (Real Estate Investment Trusts) given their correlation with equities and the objective to seek diversification of risks. 

The Sub-Committee discussed the options available. It was noted that the aim was to reduce risk, and a member commented that some of the returns suggested for property of up to 10% appeared to be too high – risky and unrealistic. Members also raised issues around the different rules in different countries, the risk of a downturn, currency risk and the need for diversification. A member raised the position of WeWork, and the risk of a bubble. John Arthur responded that the situation with WeWork was already well known, and that with property location of individual sites was always crucial. He explained that investing in buying property would not produce immediate value, as rental streams would be low until work had been undertaken to improve the property.

Some members were not supporters of investing in property, but suggested that if the Council did go for property it should reduce the risk by going through a fund. A motion to invest in REITS was moved by Councillor Stevens and seconded by Councillor Fawthrop, but this was not supported.

John Arthur advised that investing in core real estate required going through a large property house with substantial resources. However, he favoured a more entrepreneurial approach, particularly as cash-flow was not a significant requirement over the next four to five years. A member commented that the debate was too hypothetical at this stage – the Sub-Committee needed to identify a manager or a fund. Mr Arthur suggested a shortlist of managers was required.

The Committee concluded that more information was needed for the next meeting on 13^th February, although the turn-around was very tight. The Director of Finance suggested that he could ask Fidelity for a briefing and they could be asked to attend. It was also suggested that Mercer be asked for their advice on this issue. 

RESOLVED that

(1) The contents of the report be noted.

(2) A further report be made to the  ...  view the full minutes text for item 57.

Report FSD20019

The Sub-Committee considered a report seeking their agreement to sign the London Collective Investment Vehicle (CIV) Pension Guarantee and Pension Recharge Agreements, so that the scheme could be closed to new members. Nineteen boroughs had now signed, but all thirty two boroughs would need to sign.

Members agreed that additional wording should be added to the decision to ensure that the scheme remained closed to new members. It was also considered that further legal clarification was needed, including from the London CIV if possible, that the agreement was binding.

RESOLVED that

(1) The contents of the report be noted.

(2) It is agreed that the guarantee and recharge agreements be signed on the basis that the LGPS scheme is closed to new starters and remains closed, subject to further clarification of the legal position which will be reported to the next meeting.

Report FSD20013

The terms of reference of the Local Pension Board required that an annual report was produced and considered by full Council each year, as well as by this Sub-Committee and the General Purposes and Licensing Committee. The report for 2019 had been approved at the Board’s meeting on 22^nd January 2020.

The Vice-Chairman noted that the report referred to a monthly Pensions Administration report from Liberata being provided to Board members.

RESOLVED that the contents of the Local Pension Board Annual Report for 2019 be noted.

RESOLVED that the exempt minutes of the meeting held on 3^rd December 2019 be confirmed.

Report FSD20025

The Sub-Committee received a report on the triennial actuarial valuation of Bromley’s Pension Fund, which had been carried out by Mercer Limited. Leanne Johnston of Mercer Limited attended the meeting to present her findings. The report would also be considered by General Purposes and Licensing Committee on 11^th February 2020.

Since the previous valuation (31^st March 2016), the fund had increased in value from £748m to £1,032.2m as at 31^st March 2019, and from being 91% funded to being in surplus - Bromley’s investment returns were amongst the very best in the country. 

Members discussed whether the report should be published in part 1. As the final report would be published on 31^st March, the Sub-Committee agreed that it should remain in part 2, but that the minutes could be in part 1.

The Sub-Committee thanked Ms Johnston for her excellent report. The Director of Finance added that Mercer had also been particularly helpful in agreeing the “gifting” of the Mears scheme to the pension fund towards meeting any future year deficits.

RESOLVED that the outcome of the 2019 Triennial Valuation report be noted.

The Vice-Chairman reported that the Chairman had attended the CIV meeting that morning, and would give a full update at the next meeting on 13^th February.