Agenda item

A detailed report on the transactions undertaken to demonstrate the implementation of the Investment Advice recommendations and the Fund's valuation was included, as well as a report on the treasury management of the Fund's cash balances and the latest Forward Investment Programme.

The Fund continued to favour growth assets over protection assets. For the period under discussion, bonds were still not considered value for the Fund and the Fund had no investments in Bonds at this time.

The cash level at the end of September 2023 was 3.74%.

Investment in direct property where the property had a good covenant, yield and lease terms would continue. The Fund had purchased one property in the quarter for £50.25m – an industrial unit let to BAE Systems Limited. 

Investment in Alternatives, such as infrastructure and private equity, offered the Fund diversification from equities and bonds. They came with additional risks of being illiquid, traditionally had costly management fees and investing capital could be a slow process. An amount of £53m was invested in the quarter.

It was a requirement that all transactions undertaken were reported to the Committee.  Appendix A to the submitted report detailed transactions for the period 1 July – 30 September 2023.

There were net purchases of £15m in the period, compared to net purchases of £174m in the previous reporting period.

As at 30 June 2023, the Fund had £189 million invested with approved counterparties. This was a decrease of £29 million over the last quarter. The graph at Appendix B to the submitted report showed the maturity profile of cash invested as well as the average rate of interest obtained on the investments for each time period.

The Fund Valuation detailed all the investments of the Fund as at 30 September 2023, and was prepared by the Fund's custodian, Northern Trust. The total value of all investments, including cash, was £5,100 million.   The detailed valuation was attached at Appendix C to the submitted report and was also available on the Fund’s website www.teespen.org.uk.  This compared with the last reported valuation, as at 30 June 2023 of £5.051 billion.

A summary analysis of the valuation showed the Fund’s percentage weightings in the various asset classes as at 30 September 2023 compared with the Fund’s customised benchmark.

As at the 30 September 2023 the Fund’s equity weighting was 59.95% compared to 62.27% at the end of June 2023.   Redemptions of £100m in total were made from the Border to Coast UK and Overseas Developed Market Equity Funds.

A summary of equity returns for the quarter 1 July 2023-30 September 2023 were shown at paragraph 8.4 of the submitted report.

The Fund had no investments in bonds at this time.  Officers were monitoring the situation and further discussion with the advisers would take place when the levels at which investment was felt to be appropriate came into range.  Current thinking was that an investment via the Border to Coast Sterling Index Linked Bond Fund would be the most appropriate vehicle.

As at 30 November 2023 total commitments to private equity, infrastructure, other alternatives and other debt were £1.927 billion and details were provided at paragraph 8.8 of the submitted report.

Responding to a query, the Head of Pensions Governance and Investments provided an update on the Fund’s Local Investments.

ORDERED that the information provided was received and noted.