Agenda item

PENSION FUND PERFORMANCE Q1 2018/19

Minutes:

Report FSD18069

 

Details were provided of the Fund’s investment performance for the first

quarter of 2018/19. Additional detail was provided in an appended report from

the Fund’s external advisers, MJ Hudson Allenbridge.

 

The market value of the Fund ended the June quarter at £1,017.9m (£970.7m at 31st March) and had further increased to £1,044.3m as at 31st July 2018. The quarter total fund return of +4.95% against a +4.43% benchmark, compared to a +4.9% average across the 61 LGPS funds in PIRC’s universe. Detail on performance by individual fund managers was appended to Report FSD18069. 

 

The Fund’s medium and long-term returns remained very strong overall - the Fund ranking third in the PIRC LGPS universe for the year to 31st March 2018, first over three years, second over five years, first over ten years and second over 20 and 30 years.

 

Information on general financial and membership trends of the Pension Fund

was also outlined along with summarised information on early

retirements. Final outturn details for the 2017/18 Pension Fund Revenue Account, the first quarter position for 2018/19, and fund membership numbers were also appended to the report.

 

Where the assets of an employer exiting a Fund are greater than its pension liabilities as published in a revised rates and adjustments certificate (Exit Credits), Report FSD18069 advised that recent changes to the LGPS 2013 Regulations required a Fund to pay any excess in credit to an exiting employer within three months of cessation of the admission agreement. Further information would be included in the LGPS 2018 (Amendment) Regulations to be considered by the General Purposes and Licensing Committee at its meeting on 26th September 2018.

 

The report also outlined future Fund Manager attendance as:

 

·  Schroders (multi-asset income) on 7th November 2018 and

·  Baillie Gifford (global equities and fixed income) on 5th March 2019.

 

The Chairman was pleased with the performance reported. Noting that the General Purposes and Licensing (GP&L) Committee will consider further information on Exit Credits to be included in the LGPS 2018 (Amendment) Regulations, the Chairman highlighted a preference to see the Sub-Committee a Committee in its own right rather than as a Sub-Committee of the GP&L Committee. Another Member, also pleased with the report, thanked MJ Hudson Allenbridge for the Quarterly Review appended to Report FSD18069.

 

A Member expressed concern at the continued underperformance of MFS. Mr Arthur indicated that MFS looked for certainty and hope in their approach whereas Baillie Gifford looked for more growth. Mr Arthur felt the two managers work well together in the Fund’s portfolio - the MFS investment philosophy and process suggested their approach is unlikely to change.   

 

A Member asked whether MFS are best placed to respond in the event of a downturn and whether there is an argument to reduce the MFS holding rather than Blackrock’s holding should the latter perform better over a year. Mr Arthur explained that most of the MFS portfolio is now cheaper with its holdings in Facebook and Tesla expected to fall further. There are concerns about the scale of MFS underperformance and the market is not rewarding their processes. However, markets go through cycles and investors are now in a behavioural market. The market will rotate at some stage. Mr Arthur was not overly concerned with MFS but their underperformance is now noticeable. As such, he will have another meeting with MFS Managers. An important question is whether their way of performance is now outdated.  

 

RESOLVED that the contents of the report be noted.

 

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