Agenda item

Report FSD15028

The report was brought to the attention of the Committee to provide an update concerning the investment performance of Bromley’s Pension Fund in the 4^th quarter of 2014/15.

It was noted by LBB’s Financial Advisor that the Fund had performed very well, and that the rate of return over the last twelve months had increased by 18.5%. It was noted that over the three year period from 01/04/2012 to 31/03/15 the Fund’s ranking was 7 which was very good, and this was a strong performance. It was further pointed out to the Committee that the Fund had maintained a ranking of 8 over the last 10 years which was excellent. The Financial Advisor stated that this showed the importance of picking good fund managers and asset allocations. The Financial Advisor (FA) commended the Fund to Councillors.

The Chairman directed the attention of Members to section 3.8 of the report, and the associated appendix. This dealt with the issue of early retirements, and the subsequent cost to the Fund. The Chairman expressed concern that the actuary had increased his assumed figure for early retirements from £82k to £1.m. The Chairman wondered if there was a way to reduce this assumed figure.

There was general concern amongst Members concerning the level of early retirements, and it was felt that this was a matter that should be referred to the GP&L Committee.

A Member expressed the view that the Diversified Growth Fund (DGF) was not performing as well as Global Equities, and felt that these investments were in low asset classes and exposed to currency risk. He regarded these products as unsuitable for a pension fund. The Director of Finance felt that the DGF was less volatile and safer than equities, and suggested that this was a matter that should be raised with the fund managers.

It was noted that in terms of Fixed Income, Baillie Gifford managed assets of £50.4m, whilst Fidelity held fixed income assets of £65.7m; the total value of the Pension Fund as at 30/04/2015 was £731.5m.

The Financial Advisor stated that the DGF enabled managers to invest across a broader range of asset classes, without requiring separate mandates. He reminded the Committee that the DGF had been successful for the last twelve years and was a useful tool in the portfolio; he also reminded the Committee that the DGF only comprised 10% of total allocations. He described it as being able to gain equity like returns but with half the risk of equities. The FA also expressed the view that the DGF would not fall as quicker as equities in periods of market volatility.

A Member expressed the view that as the number of LBB employees fell, so the demand for cash on the Fund was proportionately increasing. This being the case, he expressed the view that the Fund should be managed to generate as much as cash as possible now as an investment for the future, and this may necessitate a requirement to invest in differing products.

RESOLVED:

(1) that the report on Pension Fund Performance Q4 2014/15 be noted

(2) that the GP&L Committee review the existing arrangements for ill health retirement

(2) that the programme for Fund Manager attendance as set out in paragraph 3.9 of the report be agreed