Agenda item

The Head of Pensions Governance and Investments presented a report of the Corporate Director of Finance, the purpose of which was to inform Members how the Investment Advisors’ recommendations were being implemented, provide a detailed report on transactions undertaken to demonstrate the implementation of the Investment Advice and to provide the Fund’s Valuation and finally to report on the treasury management of the Fund’s cash balances.

The Fund continued to favour growth assets over protection assets. For the period under discussion here, bonds were still not considered value for the Fund. The Fund had no investments in Bonds at this time. It had been agreed that a maximum level of 20% of the Fund would be held in cash and cash level at the end of September 2025 was 7.79%.

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 they had costly management fees and investing capital could be a slow process. An amount of £18.3m was invested in the quarter.

It was a requirement that all transactions undertaken were reported to the Committee. Appendix A detailed transactions for the period July - September 2025. There were net purchases of £0.5m in the period.

The Chartered Institute of Public Finance & Accountancy (CIPFA) Code of Practice (the Code) set out how cash balances should be managed. The Code stated that the objective of treasury management was the management of the Authority’s cash flow, its borrowings and investments, in such a way as to control the associated risks and achieve a level of performance or return consistent with those risks. The security of cash balances invested was more important than the interest rate received.

Middlesbrough Council adopted the Code on its inception and further determined that the cash balances held by the Fund should be managed using the same criteria. The policy established a list of counterparties (banks, building societies and others to whom the Council would lend) and set limits as to how much it would lend to each counterparty. The counterparty list and associated limits were kept under constant review by the Director of Finance.

Although it was accepted that there was no such thing as a risk-free counterparty, the policy had been successful in avoiding any capital loss through default. As at 30 September 2025, the Fund had £463.2m invested with approved counterparties. This was a decrease of £28m over the last quarter.

The attached graph in Appendix B showed the maturity profile of cash invested. It also showed the average rate of interest obtained on the investments for each time period. Delegated authority was given to the Corporate Director of Finance by the Teesside Pension Fund Committee to authorise/approve any changes made to the Treasury Management Principles (TMPs), with subsequent reporting to this committee.

The Fund Valuation detailed all the investments of the Fund as at 30 September 2025, and was prepared by the Fund's custodian, Northern Trust (NT). The total value of all investments, including cash, was £5,943 million. This compared with the last reported valuation, as at 30 June 2025 of £5,706 million. The NT copy showed an overstated value at £6.383m, the transfer of the Funds Real Estate portfolio had not been accounted for correctly, this would be amended for the next valuation.

A summary analysis of the valuation showed the Fund’s percentage weightings in the various asset classes as at 30 September 2025 compared with the Fund’s customised benchmark.

At the September 2024 Pension Fund Committee a revised Strategic Asset Allocation was agreed and a table was contained within the reports pack.

As at the 30 September 2025 the Fund’s equity weighting was 55.93% compared to 54.27% at the end of June 2025 summary of equity returns for the quarter July - September 2025. A table was contained within the reports pack.

The Fund had no investments in bonds at this time, the level of cash invested was 7.79%. Whilst discussions had been held with the Committee around investing in bonds, there had been no directive to invest as yet.

In regard to local investments, to date the Fund had three investments classified as ‘local’.

•         Ethical Housing Company - £5m investment of which £765k had been called.

•         Waste Knot - £10m investment agreed at the June 2021 Committee, payment made in full December 2021.

•         FW Capital – At the September Committee agreement was given for an investment of £20m into the Teesside Flexible Investment Fund. £4.09m had been called to date.

As at November 2025 total commitments to private equity, infrastructure and other debt were £2,003m. A table was contained within the reports pack.

ORDERED that the information was received and noted.