Agenda item

Report FSD200

The Sub-Committee received a summary of the investment performance of Bromley’s Pension Fund in the first quarter of 2020/1 including a report from the external advisor, MJ Hudson Allenbridge. The report also contained information on general financial and membership trends of the Pension Fund and summarised information on early retirements. The Chairman was pleased to note that the Fund had risen to a total value of £1.171bn.

Mr Arthur briefed the Sub-Committee on the report, emphasising that performance had been strong, with an increase of 17.7% over the quarter, driven in particular by Baillie Gifford. The situation remained very volatile, with the likelihood of a further wave of the pandemic and the United States presidential election.  The Fund was over-weighted towards equities at 66.6%, rather than the 60% in the asset allocation strategy.  He recommended a re-balancing towards around 63%, which the Sub-Committee supported. The position on cash-flow was noted and would continue to be monitored.

The report included a part 2 appendix on International Real Estate Manager selection. John Arthur stated that, despite the changes accelerated by Covid-19 to the office and retail sectors, this was still a good time to invest in international property through an adept investment manager looking to add value to particular properties. He also wanted to see greater diversification in the Fund. These funds ran on a limited lifecycle of roughly ten years, and there were limited timeframes for investing. The issue of honing the terms of reference further in view of the events of the last six months was raised, but it was considered that it was important that the process remained outcome focussed and the fund managers should have flexibility.

Members agreed that the decision made earlier in the year to diversify into international property was sound, and wanted to proceed with the selection process for a fund manager in September. The chairman suggested that this should be done in a physical meeting if possible.

Members considered the Council’s fixed interest mandate, which as at the end of June was 13% of the Fund. The recommendation from MJ Hudson, which Members supported, was to move UK Government Gilts to UK Investment Grade Credit by switching both the current mandates into the Fidelity Sterling Corporate Bond Fund.

RESOLVED that

(1) The contents of the report be noted.

(2) The latest cash-flow position and that the situation will continue to be closely monitored as outlined in the MJ Hudson report be noted.

(3) No action be taken on the recommendation to consider currency hedging to cover a value of up to 50% for the fund’s global equities, as outlined in the MJ Hudson report.

(4) In relation to the weighting of asset classes, 3.5% of the Fund (approximately £40m) be switched from Global equities to Multi-Asset Income, as recommended in the MJ Hudson report.

(5) The latest shortlist for the international property procurement be noted, and it is agreed that the final selection will take place at the  meeting in September as outlined in Appendix 6 on the Part 2 agenda.

(6) The Baillie Gifford fixed interest fund is transferred to the Fidelity Sterling Corporate Bond Fund.