There were no matters outstanding.

A)  Fund Manager Presentation – Baillie Gifford

The Committee received a presentation from Baillie Gifford representatives, Chris Murphy, Client Service Director: Local Government Client Team and Tim Gooding, Client Service Director: Global Alpha Team, on the London Borough of Bromley Superannuation Fund. 

Due to the current economic climate which had been impacted by geopolitical instability and significant increases in inflation and energy costs, performance during the 2022/23 financial year had been significantly below benchmark.  This had been particularly marked in relation to stock held in tech companies which had seen exceptionally high growth during the pandemic and were now going through a period of normalisation but were considered a strong long-term investment in having better margins and much lower debt than the index on average.  Performance over the long-term remained robust with active management outperformance of the Local Authority’s investment with Baillie Gifford valued at £143.1M since 1 December 1999, with the value of the portfolio as at 30 September 2022 totalling £473,046,311.  Over the past year, Baillie Gifford had worked to rebalance the portfolio with less stock held in technology-enabled companies and those with significant Chinese exposure, and more to durable franchises.  The weight by category was now about 40% ‘compounders’, 30% ‘disruptors’ and 30% ‘capital cycle’ with the downturn in company valuations enabling the purchase of some outstanding investments at depressed prices.  Growth investing would remain a key focus in future with innovation and structural change anticipated across a range of industries, such as healthcare and education, as well in emerging markets beyond China.  The example of Moderna was used as a company experiencing reduced cashflow in the post-COVID period that was well-placed for long term growth due to technical innovations linked to the development of its COVID-19 vaccine.

In considering the update, the Chairman observed that just over a year ago, Baillie Gifford had presented to the Committee on the over-performance of its investments and that the recent underperformance demonstrated the impact of the difficult economic climate.  A Member queried investments in Russia, and the Client Service Director: Global Alpha Team reported that stock held in the VK Group which was domiciled in Russia had recently been sold.  A small holding in Russian stocks remained but were currently frozen and would be divested once trading resumed.  The fund held no investments in Qatar but was looking to invest more in the growth markets of Latin America and South-East Asia when suitable opportunities arose.  In response to a question by a Member, the Client Service Director: Global Alpha Team confirmed that the fund’s exposure to Chinese investments had been reduced from approximately 8-9% to 4-5% over the past 12-months in response to concerns around the Chinese Government’s view of foreign investment.  Another Member queried Elon Musk’s ongoing leadership of Tesla following his high-profile acquisition of Twitter, and the Client Service Director: Global Alpha Team advised that as a leading innovator in electric vehicles and energy, Tesla remained a robust investment option and the company benefitted from a strong leadership team that went beyond its co-founder and CEO. 

A Member queried Baillie Gifford’s corporate policies around free speech and further details would be provided following the meeting.  The Chairman observed that the Baillie Gifford was a strong advocate for environmental and social governance which was built into their investment practice.

The Chairman thanked the representatives of Baillie Gifford for their excellent presentation.

RESOLVED: That:

·  Matters outstanding be noted; and,

·  The presentation from Baillie Gifford be noted.