Agenda item

A report of the Director of Finance was presented to inform Members of the 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.

At the June 2018 Committee it was agreed that a maximum level of 20% of the Fund would be held in cash. The cash level at the end of December 2022 was 8.37%.

Investment in direct property would continue on an opportunistic basis where the property had good covenant, yield and lease terms. The Fund had purchased two properties in the quarter at a total cost of £53 million.

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.   £89 million was invested in the quarter.

Appendix A to the submitted report detailed transactions for the period 1 October 2022 to 31 December 2022. There were net purchases of £144 million in the period, compared to net sales of £162 million in the previous reporting period.

As at 31 December 2022, the Fund had £414 million invested with approved counterparties. This was a decrease of £189 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 December 2022, including cash, was £4,953 million, compared with the last reported valuation as at 31 March 2022, of £4,812 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 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.

It had been agreed by the Pension Fund Advisers and Fund Officers that there would be no changes to the Strategic Asset Allocation following the Actuarial Valuation.  However it was acknowledged that work would continue to ensure the Fund’s assets were more closely aligned to the strategic asset allocation. It was also acknowledged that there might be times in the short to medium term where the strategic allocation to a particular asset class was above the long term target.  In any such case it should remain within the maximum level set out in the table at paragraph 8.2 of the submitted report.

At the end of 31 December 2022 the Fund’s equity weighting was 60.2% compared to 58.3% at the end of September 2022. There were no plans to purchase or sell equities at this time.  A summary of equity returns for the quarter 1 October 2022 to 31 December 2022 was shown at paragraph 8.4 of the submitted report.

To date the Fund had agreed three Local Investments.  The Committee considered two further local investment proposals at its October 2022 and

December 2022 meetings, and agreed that due diligence should be carried out in relation to those proposals.

As at 28 February 2023 total commitments to private equity, infrastructure, other alternatives and other debt were approaching £1,675 million and a breakdown of that figure was included at paragraph 8.8 of the submitted report.

A Member requested information in relation to the Fund’s exposure to tobacco companies in BCP and State Street. 

ORDERED as follows:

1.      That the report was received and noted.

2.      Information detailing to the Fund’s exposure to tobacco companies in Border to Coast and State Street would be provided.