Agenda item

Report FSD23081

The report provided a summary of the investment performance of Bromley’s Pension fund in Quarter 2 of the 2023/24 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.

The Committee received an update from the Senior Advisor: Apex Group Ltd who suggested three possible outcomes to the current economic situation.  This comprised a slowing of United States economy as interest rate rises took effect; that economic growth in the United States would continue and prompt further raising of interest rates; or that something would break creating a highly destabilising investment environment.  The Chairman queried what action the Committee could take to protect against any such destabilisation and the Senior Advisor: Apex Group Ltd observed that the recent transfer of 5% or £65M from the Baillie Gifford Global Equity Portfolio into a Short-Dated UK Corporate Bond fund to rebalance the Bromley Fund’s tactical asset allocation nearer to the Strategic Asset Allocation Benchmark had helped mitigate the potential risk.  The contrasting investment strategies of MFS and Baillie Gifford also provided a key balancing factor in what was an increasingly volatile economic environment.  A Member expressed concern at potential overlap between the MFS and Baillie Gifford Portfolios and the Senior Advisor: Apex Group Ltd agreed to undertake an analytical exercise to identify the level of overlap between the two Portfolios as well as relative performance against the benchmark to be reported to a future meeting of the Pensions Committee.  The Member also requested that further details on the investment in Taiwan Semiconductor Manufacturing Company Limited be included in the next quarterly report with the geopolitical risk flagged on the risk register.

A Member was concerned about Baillie Gifford’s recent performance and voiced their increasing scepticism about Baillie Gifford’s approach to investing what was the Bromley Pension Scheme’s biggest fund.  The Senior Advisor: Apex Group Ltd emphasised Baillie Gifford’s strong investment philosophy and process, including in the area of Environmental, Social and Governance.  Close scrutiny would be placed on Baillie Gifford’s performance moving forward by both the Local Authority and the London Collective Investment Vehicle in which this investment was held.  Baillie Gifford could also be invited to attend meetings of the Pension Committee whenever it was felt that additional scrutiny was needed.  The Senior Advisor: Apex Group Ltd further suggested that moving forward, the Committee consider producing documentation that set out its ongoing commitment to Environmental, Social and Governance and the Chairman confirmed that the Committee would take this forward over the coming year.

The Committee went on to discuss the purpose of the investment strategy of the Bromley Pension Fund which was to secure sufficient cashflow to cover outgoing pension payments without the sale of investments and, as a fully funded Pension Scheme, alleviate any pressure on Council Tax payers by not requiring any top-up from the Local Authority’s General Fund.  The Chairman added that it was important to remember that the Bromley Pension Fund belonged to Scheme members, many of whom were paid modest salaries, and that the Local Authority was merely the trustee of this fund.  A Member flagged that there had been an increase in staff choosing to opt-out of the Bromley Pension scheme which likely reflected the challenging economic climate.  The Committee discussed the benefits of joining the Bromley Pension scheme which was a Defined Benefit Pension Scheme with a generous employer contribution, and the Member agreed to approach the Director of Human Resources about arranging a pensions seminar to encourage higher take-up.  Further details about the salary bands with the highest proportion of opted-out employees would be circulated to the Committee following the meeting. 

RESOLVED: That:

·  The contents of the report and appendices be noted including:

·  Appendix 5 which provided quarterly performance monitoring;

·  Appendix 6 which set out the key developments in the Local Government Pension Fund expected during the next five years; and,

·  Appendix 7 which set out the Climate Change Scenario report prepared by the Actuary in March 2023 as part of the triennial valuation.

·  The existing contract with WTax UK Ltd to provide specialist tax advice be extended for a further two years from 1 April 2024 to 31 March 2026.