Agenda item

A report of the Director of Finance was presented to inform Members of the Teesside Pension Fund Committee how the Investment Advisors' recommendations were being implemented.  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 and currently had no investments in Bonds. Whilst it was considered that Bond yields would rise in the long run, at present yields did not meet the actuarial requirements for the Fund and should continue to be avoided at these levels unless held as a short term alternative to cash.

At the June 2018 Committee it was agreed that a maximum level of 20% of the Fund would be held in cash. Cash levels at the end of December 2021 were 11.23%. The Fund would continue to use cash to move away from its overweight position in equities and invest further in Alternatives.

Investment in direct property would continue on an opportunistic basis where the property had good covenant, yield and lease terms.  There were no sales or purchases during the quarter.

The Fund was considerably underweight its customised benchmark and, providing suitable investment opportunities were available, would look to increase its allocation to this asset class up to the customised benchmark level.  £87.2 million was invested in the quarter. 

Appendix A to the submitted report detailed transactions for the period 1 October 2021 to 31 December 2021. There were net sales of £60.3 million in the period, this compared to net sales of £100.8 million in the previous reporting period. 

As at 30 December 2021, the Fund had £565.2 million invested with approved counterparties. This was an increase of £30.5million over the last quarter. 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 total value of all investments as at 31 December 2021, including cash, was £5,040 million, compared with the last reported valuation as at 30 September 2021, of £4,871 million.

A summary analysis of the valuation, attached at Appendix C to the submitted report, showed the Fund's percentage weightings in the various asset classes as at 31 December 2021 compared with the Fund's customised benchmark.

The Forward Investment Programme provided commentary on activity in the current quarter as well as looking ahead to the next three to five years. Details of the long term target Strategic Asset Allocation and the targets for 31 March 2022 were shown at paragraph 8.2 of the submitted report.

At the end of December 2021 the Fund’s equity weighting was 67.1% compared to 70.9% at the end of September 2021. A schedule was in place to reduce investment in equities over the period 1 April 2021– 31 March 2022 by £725 million, and this figure would be reviewed throughout the year. In the quarter October-December 2021 the Fund sold £185 million. Further transactions would be reported at future meetings.

A summary of equity returns for the quarter 1 October–31 December 2021 was contained at paragraph 8.3 of the submitted report.

The Border to Coast Series 2 Alternative Funds would be live from 1 April 2022, and the Fund had agreed to commit £150 million per year for the next 3 years to the Infrastructure Fund and £100 million per year for the next 3 years to the Private Equity Fund.  The Fund would also commit £100 million over the 3 year period to a new Border to Coast Climate Opportunities Fund.  This amount might be scaled back to £80 million due to over-commitments.

As at 28 February 2022 total commitments to private equity, infrastructure, other alternatives and other debt were approaching £1,203 million and a breakdown of that figure was included at paragraph 8.7 of the submitted report.

ORDERED that the report was received and noted.