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 June 2021 were 8.31%. 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.   During the quarter, a Development Funding Agreement was completed in respect of a £30 million property in Yeovil.

 

£47.3 million was invested in Alternatives during the last 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.

 

Appendix A to the submitted report detailed transactions for the period 1 April 2021 to 30 June 2021. There were net sales of £76.6 million in the period, this compared to net purchases of £10.1 million in the previous reporting period.

 

As at 30 December 2021, the Fund had £389.8 million invested with approved counterparties.  This was a decrease of £49 million 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 30 June 2021, including cash, was £4,705 million,

compared with the last reported valuation as at 30 March 2021, of £4,553 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 30 June 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 June 2021 the Fund’s equity weighting was 75.68%.  A schedule was in place to reduce investment in equities over the period 1 April 2021– 31 March 2022 by £725m, and this figure would be reviewed throughout the year. In the quarter March 2021 – June 2021 the Fund sold £125m.  Further transactions would be reported at future meetings.

 

The transfer of £1.3bn from the SSGA Passively Managed Funds to the Border to Coast Actively Managed Overseas Developed Fund completed in May 2021, in line with the Committee’s instructions.

 

A summary of equity returns for the quarter 1 April – 30 June 2021 was contained at paragraph 8.2 of the submitted report.

 

To date the Fund had agreed 3 Local Investments:

 

• GB Bank – Initial agreement of a £20m investment, this has been called in full. A further investment was agreed at the June 2021 Committee: this was dependent on the bank meeting agreed criteria.
• Ethical Housing Company - £5m investment of which £361k had been called.
• Waste Knot - £10m investment agreed at the June 2021 Committee, nothing called to date.

 

As at 30 August 2021 total commitments to private equity, infrastructure and other Alternatives were approaching £1,007m and a breakdown of that figure was included at paragraph 8.7 of the submitted report.

 

ORDERED that the report was received and noted.