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.  It was suggested that it was timely for the Committee to give consideration as to whether to invest in index linked government bonds, bonds related to companies or high grade corporate bonds.

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 2022 were 14.9%.  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 direct property purchases or sales were made in the period, however and additional investment of £15m was made into an existing Property Unit Trust. 

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.  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.   £31.6 million was invested in the quarter.

Appendix A to the submitted report detailed transactions for the period 1 April 2022 to 30 June 2022. There were net purchases of £131m in the period, compared to net sales of £252m in the previous reporting period.

As at 30 June 2022, the Fund had £724.5 million invested with approved counterparties.  This was a decrease of £92.9 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 2022, including cash, was £4,868 million, compared with the last reported valuation as at 31 March 2022, of £5,071 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 2022 compared with the Fund's customised benchmark.

The Forward Investment Programme provided commentary on activity in the current quarter and looked ahead to the next three to five years.  Details of the Strategic Asset Allocation agreed at the March 2021 Pension Fund Committee were shown at paragraph 8.2 of the submitted report.

At the end of June 2022 the Fund’s equity weighting was 58.1% compared to 59.9% at the end of March 2022.  There were no plans to purchase or sell equities at this time.  A summary of equity returns for the quarter 1 April 2022 to 30 June 2022 was shown at paragraph 8.3 of the submitted report.

There were two property assets that the Fund was currently waiting to exchange contracts on and progress would be reported to the Committee at the next meeting.

To date the Fund had agreed three Local Investments.

The Border to Coast Series 2 Alternative Funds went live on 1 April 2022, and the Fund had agreed to commit £150 million per year for the next 3 years to the Infrastructure Fund, £100 million per year for the next 3 years to the Private Equity Fund and £80 million to the Climate Opportunities Fund.

As at 31 August 2022 total commitments to private equity, infrastructure, other alternatives and other debt were approaching £1,563 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.