Minutes:
The Chairman welcomed Brian Lee (Chief Operating Officer), Jason Fletcher (Chief Investment Officer), Cameron McMullen (Client Relations Director), and Stephanie Aymes (Client Relations Manager) from the London CIV to the meeting. Jason Fletcher, led the Sub-Committee though a presentation on the CIV, beginning by stating that although Bromley had no investments with the CIV it was a valued member and they hoped Bromley would be more involved in the future. Pooling was set up to deliver improved performance, provide a broader range of investment opportunities, deliver cost savings to clients and provide transparent reporting and oversight. He also covered the funding model, the latest staff appointments, procurement of an investment tool to select and monitor fund managers and the development of an investment governance document which would be shared soon with all client funds and advisors.
The CIV was aiming to add value across the investment lifecycle – Design, Select, Manage, Sell. He highlighted manager selection, manager monitoring, fund monitoring and key turning points in the markets. The CIV had fifteen funds; eight were equities funds while the other were global markets funds. Since inception, the average fund had out-performed their benchmarks – the best performer was the Baillie Gifford Global Alpha Growth Fund which Bromley was also invested in. This had thirteen investors, and there were discussions with Baillie Gifford and investors about making the fund more Paris-aligned. It was possible that two streams could be set up within the fund, if there was demand for different approaches. All reports on funds were available on the client portal. There were plans to launch three new funds over the next four months, and a further two in the next six months.
In response to questions from Cllr Stevens, Mr Fletcher confirmed that the CIV was neutral on Paris-aligned funds, but was responding to client demand and to the issue being raised by Baillie Gifford. Mr Fletcher also gave further details about the staffing of his team – he had filled two posts since joining, expected to recruit to two new roles in the new financial year and was keen to convert contractors to permanent employees and reduce key-person risk. Mr Lee confirmed that the staffing position was stable and recruitment was in line with budget plans.
Councillor Jefferys asked about the CIV’s vision for five to ten years ahead, and how the CIV viewed clients with a more passive attitude to investment. Mr Fletcher responded that he intended to launch more alternatives and that although he preferred to take an active approach the CIV would be providing for all its investors.
Cllr Fawthrop asked whether the CIV was subject to Freedom of Information regulations, particularly in respect of the agreements behind the setting up of the CIV. Mr Lee confirmed that the CIV was subject to Freedom of Information regulations. Mr Fletcher stated that he was fully committed to transparency particularly around costs. Cllr Fawthrop queried whether funds were really performing well, but Mr Fletcher stated that this was on a pound for pound basis and the majority of the funds had out-performed their benchmark as well, particularly the larger funds. Cllr Fawthrop suggested that the funds ported in appeared to be doing well, whereas funds set up by the CIV were not performing so well. Cameron McMullen added that the CIV was working in collaboration and through seed investment groups. He also emphasised that a range of policies were available to client funds and investors through the portal.
Cllr Jeal asked about managing the demands of Councils as both shareholders and clients, whether there were measures in place to maintain scale to deliver savings as more funds were added and assets spread more widely, and whether the CIV model could sit alongside what Bromley already did in terms of receiving regular monitoring reports, scrutinising fund managers and selecting new fund managers. Mr Lee responded that the CIV had strong governance processes with quarterly shareholder committees and two additional meetings each year that were not investment focussed, maintaining the separate roles of investors and shareholders. Mr Fletcher explained that the smaller funds with less economies of scale were in private markets where there were great opportunities. He accepted that all pools were struggling with reporting, but the CIV would work closely with fund managers to make reports useful. The CIV was hoping to bring fund managers in similar areas together to speak against each other, and all clients would have access to these sessions. The aim was to give more access to more managers. Mr McMullen clarified that where the Sub-Committee interviewed a fund manager there would need to be a CIV representative present to deal with issues such as fees. Cllr Fawthrop suggested that there had to be a cost involved for the CIV in attending, which ultimately would be passed to clients – CIV representatives stated that this would not be a separate invoice but would be borne within the overall fees. Cllr Jeal also asked whether the opportunity to take money out of an investment through the CIV would apply to all investments. Mr Lee stated that this was correct, and was set out in the prospectus - the Council could redeem in cash or in specie.
The Director of Finance asked about the timeframes that might be involved in the termination of a fund, and what factors, apart from performance, would be considered - for example if differing approaches to Paris/ESG issues led to a fund manager being removed that Bromley wanted to retain, could Bromley’s investment stay within the CIV or would there be additional transfer costs for Bromley to take it back? Mr Fletcher responded that historically, funds might be on enhanced monitoring for up to six months as a means of trying to guide them back to good performance. Where there were more drastic events then action might need to be taken much more quickly. As well as performance, a number of issues were taken into account and RAG rated, including strategy and demand, resources, risk management, responsible investment, compliance, operational issues and transparency. Cost transparency mattered, and making use of cost information.
The presentation continued in part 2.