The report provided a summary of the investment performance of Bromley’s Pension fund in Quarter 4 of the 2022/23 financial year and included information on general financial and membership trends of the Pension Fund as well as details of key developments in the Local Government Pension Fund (LGPS) expected during the next five years.
In considering the report, the Chairman was pleased to note that the London Borough of Bromley Pension Fund remained approximately 115% funded which represented a healthy position and advised that the Government guidance on potential new requirements within the LGPS regulations on mandatory pooling was expected to be published shortly. A Member noted that the SDA had also recently published a report on asset management market performance which was likely to impact future investment opportunities and the Director of Finance would follow this up with fund managers after the meeting. The Local Authority’s existing investment with Baillie Gifford had recently been transferred to the London Collective Investment Vehicle following the decision by the Pensions Committee on 13 March 2023. In light of this transfer, the Committee agreed that that the published schedule of Fund Manager attendance for the 2023/24 financial year be amended to schedule presentations from Baillie Gifford and Morgan Stanley for the next meeting of the Pensions Committee on 11 September 2023, with the planned presentation from MFS to be rescheduled to 12 February 2024. It was further agreed that fund managers be requested to provide their presentations to the Committee at least one week prior to the meeting to allow more time for Members to review this information.
The Committee received an update from the Senior Advisor: Apex Group Ltd (formerly MJ Hudson) who confirmed that MJ Hudson had been bought by global financial services provider, Apex Group Ltd and that this was not anticipated to impact existing service provision. In presenting his quarterly report, the Senior Advisor: Apex Group explained that there had been a rebound across nearly all asset classes since October 2022 and that fund performance had slightly outperformed the benchmark over the same period. It was considered likely that there would be a period of recession impacting the United States of America and the UK in the short- to medium-term and it was likely that the next few years would be challenging from an investment perspective. The Bromley Pension Fund’s tactical asset allocation continued to deviate from the Strategic Asset Allocation Benchmark in being overweight in equities although this disparity had reduced following a recent rebalancing exercise. Moving forward, Environmental, Social and Governance would be a key area of focus and the Senior Advisor would be meeting with the London Collective Investment Vehicle in Summer 2023 to explore this further, including carbon weighting on pensions investments. In response to a query from a Member, the Senior Advisor: Apex Group Ltd advised that whilst currency hedging offered an investment option, outcomes were often unpredictable and required the right entry point.
In considering the update, a Member was concerned that the Strategic Asset Allocation Benchmark continued to be overweight in equities and the Chairman provided reassurance that he would be reviewing this prior to the next meeting of the Pensions Committee on 11 September 2023. The Member expressed concern at reviewing the Strategic Asset Allocation on a six-monthly basis as it was important to take a longer-term view of investments and another Member underlined the need to differentiate between rebalancing the Strategic Asset Allocation, which was undertaken on a three-yearly basis, and rebalancing the Portfolio in line with the Strategic Asset Allocation Benchmark which could be taken forward at any time. The Strategic Asset Allocation had been considered at the meeting of the Pensions Committee on 1 December 2022, but no decisions had been made at that time in response to ongoing economic uncertainties. The Committee agreed that the three-yearly Strategic Asset Allocation be considered further at the meeting of the Pensions Committee on 6 December 2023 and a Member suggested that this include consideration of the impact of a potential recession on investments in the short- to medium-term.
· The contents of the report and information contained in the related appendices be noted including:
a) Appendix 5 which detailed:
· Asset allocation after the rebalancing of Fund assets;
· A special note on MJ Hudson’s assessment of the current banking crisis; and,
· A report in the Part 2 (Exempt) agenda which covered one of the options of the asset allocation review.
b) Appendix 6 which set out the key developments in the Local Government Pension Fund expected during the next five years.