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. The Fund had no investments in Bonds currently.

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 March 2022 were 16.13%. 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. No property transactions were undertaken in this quarter.

During the quarter, £26.7 million was invested in Alternatives. The Fund was 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 January 2022 to 31 March 2022. There were net sales of £252 million in the period, this compared to net sales of £60.3 million in the previous reporting period.

As at 31 March 2022, the Fund had £817.4 million invested with approved counterparties.  This was an increase of £252.2 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 31 March 2022, including cash, was £5,071 million, compared with the last reported valuation as at 31 December 2021, of £5,040 million.

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 current commitments in equities, bonds and cash, property, local investments and alternatives were included in paragraph 8 of the submitted report.

In line with the agreed strategy, the Fund had reduced its equity allocation from 70% to 60% by selling units in BCP equity funds. 

A pie chart showing the current asset allocation in visual form was provided on page 41 of the submitted report. 

The Border to Coast Series 2 Alternative Funds went live on 1 April 2022 and the Teesside Pension Fund had agreed to commit £150m per year for the next 3 years to the Infrastructure Fund and £100m per year for the next 3 years to the Private Equity Fund.

The Fund had also subscribed to an investment of £100m over the 3 year period to a new Border to Coast Climate Opportunities Fund, however due to over-commitments this was scaled back to £80m.

As at 31 May 2022 total commitments to private equity, infrastructure, other alternatives and other debt were approaching £1,533m.

ORDERED that the report was received and noted.