Agenda and minutes

None.

None.

The minutes of the previous meeting were agreed as a true and accurate record. There were no matters arising.

The minutes of the Local Pension Board meeting of 13 April 2021 were noted.

Neil Buxton, Technical Specialist - Pension Fund Policy and Governance, presented this report which provided an updated forward plan for the Pension Fund Investment Sub Committee, rolled forward to cover the year ahead. Members suggested that scheduled training be included in future editions. 

Resolved

That the Pension Fund Investment Sub-Committee noted the forward plan.

This was a new report presented by Bob Swarup, Independent Advisor to the Sub-Committee, which sought to set the scene on the Pension Fund’s greatest influences and encourage discussion of wider issues throughout the remainder of the agenda.  The report focussed on four key areas: the continuing impact of Covid-19 and government reactions, inflation (including supply chain issues), negative real interest rates in the UK, and

investors’ capital deployment.

In response to questions regarding inflation, Dr Swarup indicated that he felt the position was still somewhat transient with an element of short term demand and the economy was still stop/start and this needed to stabilise so that companies would invest.  He felt that capacity issues had not been fully factored in.  Noting High Street closures, he pointed out that this created less capacity for demand which resulted in greater pricing power for anyone left in the market.  He also pointed to record job openings balanced by significant demand for wage increases (eg in the haulage industry) which would eventually show in prices. He considered that the central banks were in a difficult position and would be looking for inflation to come back down.

Dr Swarup noted that wages had been low for 10-15 years and this pent up wage demand, decrease in natural resources, increase in energy costs, rising costs of carriage (through an under investment in shipping) and the huge shortages in supply chain created a risk of spikes but ultimately the rise in inflation would mute, and energy prices would come down. The concern was that certain parts of the supply chain like wages and conductors would stabilise at a higher level.

Dr Swarup indicated that if the Bank of England decided inflation would not return to target, they would write to the Chancellor.  He noted that the Federal Reserve had changed to an average inflation target and that was one option, but the government would be thinking more long term and seek to maintain credibility with the public.  

In response to a question regarding reinvigoration of the high streets, Dr Swarup noted that some investors had not allowed property prices to rise too much.  There had been a lower yield for warehouses and property owners were not willing to write down the value, preferring fewer tenants than lower rates.  If the market was hollowed out, there could be ramifications which were destructive to the balance sheet in the short term.

Regarding questions in relation to private debt capital overhang, Dr Swarup responded that it was significant that the chart included in the slide presentation (slide 14) showed some overhang.  He noted that over the last three years there was a lot of money raised that did not need to be deployed immediately.  There was a danger that too much capital left on the balance sheet would result in poor quality purchases and a good cash management strategy was required.  Philip Pearson added that strong growth was being seen in capital committed to private debt, with a significant  ...  view the full minutes text for item 4.

Chris Norton, Strategy and Commissioning Manager (Treasury, Pension, Audit & Risk) presented this report which provided an update on the risks to the Fund and actions taken to manage them.  The report also detailed the proposed risk appetite for adoption. 

In response to questions from the Chair regarding the Covid-19 risk assessment, Chris Norton advised that there had been a transient impact in terms of investment but pensions had continued to be paid and the Team had risen to the challenges presented by the pandemic thus far.  In terms of the annual accounts, the external auditors were struggling to complete their work and, therefore, these would be signed off by Council later than usual.

Members considered that it would be helpful if the risk register included the rating from the previous period and any changes made, so that any fluctuation could be more easily noted.

Resolved

1.     That the Pension Fund Investment Sub Committee noted the risk register attached to the report at Appendix B.

2.     That the Pension Fund Investment Sub Committee noted and approved the Risk Appetite statement at paragraph 2.3 of the report.

Members had previously undertaken training on investment beliefs and had subsequently been asked to complete a questionnaire which sought to align their views to a set of statements across purpose, strategy and structure, implementation and governance.  Discussion and debate on the questionnaire results in a recent workshop setting had resulted in the drafting of an updated set of Investment Beliefs which had been circulated to the Sub-Committee Members prior to this meeting. 

Some suggestions for changes to the wording of the statement had been received by email from Andrew Felton, Assistant Director – Finance particularly regarding the phrasing of belief 19 which implied that a passive option was required to be adopted before active management could be considered.  Philip Pearson explained that there was a grey area between passive and active management with passive management relating to investment in the index and active management requiring decisions about which stocks to invest in and the weights that applied.   The Committee also considered that it would be useful to define Responsible Investment prior to its first usage in the document and it was further suggested that the document should reference the UNPRI six principles for responsible investment.

Victoria Moffett confirmed that the investment beliefs should be reviewed before each investment strategy review.

Resolved

1.     That the Pension Fund Investment Sub Committee noted the tabled beliefs.

2.     That the Pension Fund Investment Sub Committee approved the updated Investment Beliefs subject to inclusion of the suggested changes (appended to these minutes).  

Neil Buxton, Technical Specialist - Pension Fund Policy and Governance, presented the draft training policy to which was appended the training strategy for members of the pension fund committees, the local pension board and for senior council officers involved in the management of Warwickshire Pension Fund.

Chris Norton, Strategy and Commissioning Manager (Treasury, Pension, Audit & Risk) added that it was planned to undertake the National Knowledge Assessment on an annual basis to inform training needs and that the plan was flexible enough to include topical issues. 

In response to a question regarding provision for online training, Richard Warden noted that functionality was being added to the online portal which included videos and links to library documents.

The Chair noted that the current training programme provided for much higher level discussion and Chris Norton, Strategy and Commissioning Manager (Treasury, Pension, Audit & Risk), explained that there were more workshop sessions taking place outside the formal meeting setting to provide the Sub-Committee with more time to consider key issues and enable the business of the formal meetings to progress more smoothly.

Suggestions were received and noted for training on private markets (quarter 4) and climate change.

Resolved

That the Pension Fund Investment Sub Committee approved the Training Policy for the Warwickshire Pension Fund attached to the report at Appendix 1

To consider passing the following resolution:

‘That members of the public be excluded from the meeting for the items mentioned below on the grounds that their presence would involve the disclosure of exempt information as defined in paragraph 3 of Schedule 12A of Part 1 of the Local Government Act 1972’.

Resolved

That members of the public be excluded from the meeting for the items mentioned below on the grounds that their presence would involve the disclosure of exempt information as defined in paragraph 3 of Schedule 12A of Part 1 of the Local Government Act 1972.

Resolved

That the Pension Fund Investment Sub-Committee noted the report.

Resolved

1.     That the Pension Fund Investment Sub-Committee noted the report.

2.     That the Pension Fund Investment Sub-Committee reiterated the decision to allocate 10% of the Pension Fund to MAC once it became available, subject to the MAC sub-fund meeting certain “necessary conditions” as outlined in paragraph 3.7 of the report.

Resolved

That the Pension Fund Investment Sub-Committee noted the report.

Resolved

1.     That the Pension Fund Investment Sub-Committee noted the presentation by Border to Coast Pensions Partnership.

2.     That the Pension Fund Investment Sub Committee supports the contribution of £500,000 by Warwickshire Pension Fund towards the completion of Phases 2 and 3 of the Border to Coast Real Estate programme, and asks the section 151 Officer in making the decision regarding the contribution to put forward to Border to Coast Pensions Partnership the Committee's comments regarding the business case for the fund and the risks to be considered.

The exempt minutes of the previous meeting were agreed as a true and accurate record. There were no matters arising.