Agenda item

Report FSD22017

The report provided a summary of the investment performance of Bromley’s Pension Fund in the third quarter of 2021/22. The report also contained information on general financial and membership trends of the Pension Fund and summarised information on early retirements.

The report included a quarterly report from MJ Hudson which John Arthur presented. He explained that the fourth quarter of 2021 had been reasonable  for markets, with Bromley’s Fund rising to £1.43bn. However, while the benchmark had risen by 4.73%, the Fund had underperformed at 1.87%, largely due to a downturn in the Baillie Gifford portfolio. Baillie Gifford was still capable of adding value in the long term and performance was within the risk profile.

Concerns remained about inflation, with CPI at 5.4% and RPI at 7.5% in the UK. Inflation was expected to remain above the Bank of England target of 2% in the medium term. Growth was expected to be reasonable in the current year, but a slowdown was expected by 2023/24. The war in Ukraine was highlighting the need to control supply chains, reversing the trend towards globalisation that had dominated the last forty years. The Fund’s cashflow forecasts had been updated, and were still acceptable.

The Task-force on Climate-Related Financial Disclosures (TCFD) requirements already applied to large private sector pension funds, and were expected to apply to the LGPS for 2022/23 data. Mr Arthur was already discussing this with Bromley’s investment managers. The Chairman reminded members that an actuarial review was due and that there would be an asset allocation review in 2022 which should be completed by the end of the calendar year. He was sceptical that the concentration on ESG would be beneficial for returns and considered that the Committee should focus on its fiduciary responsibility and oppose any attempts to use the LGPF for social projects, infrastructure or housing. 

The Chairman reported that an interview with Baillie Gifford was scheduled for the coming Thursday. In response to a question, Mr Arthur confirmed that, taking into account Bailie Gifford’s poorer performance more recently, the Fund was still overweight on equities.

The Director of Finance commented that during a potential recession tax receipts would be poor leading to reductions in public spending. Mr Arthur commented that, from the Government’s point of view, high inflation had the benefit of reducing the impact of debt.

A member commented that Bailie Gifford’s underperformance appeared to relate largely to Chinese holdings. She was concerned about the impact of deteriorating relationship between east and west, and about a holding in a Russian state-controlled bank. Mr Arthur commended the Committee for raising the issue of holdings in China some six months previously – Baillie Gifford’s focus was on finding effective companies and they were not infallible. In response to comments from members about divesting, Mr Arthur stated that he would ask Baillie Gifford about this at the meeting on Thursday and consider the matter further.

Cllr Marlow reported that the Office for National Statistics (ONS) had recently published a report on the shortcomings of the Retail Prices Index (RPI) which he would arrange to be circulated. (ONS Report)

RESOLVED that the contents of the report and appendices be noted.