Agenda and minutes

RESOLVED:

That Mr. P. Osborne CC be elected Chairman of the Local Pension Committee for the period ending with the date of the Annual Council meeting in May 2019.

Mr. P. C. Osborne in the Chair

RESOLVED:

That Mr. L. Breckon CC be elected Vice Chairman of the Local Pension Committee for the period ending with the date of the Annual Council meeting in May 2019.

The minutes of the meeting held on 23 February were taken as read, confirmed and signed.

The Chief Executive reported that no questions had been received under Standing Order 35.

The Chief Executive reported that no questions had been received under Standing Order 7(3) and 7(5).

There were no urgent items for consideration.

The Chairman invited members who wished to do so to declare any interest in respect of items on the agenda for the meeting. No declarations were made.

The Chairman sought and obtained the consent of the Board to vary the order of business from that set out on the agenda.

The Committee considered a report of the Director of Corporate Resources the purpose of which was to seek approval of the revised LGPS Central's Responsible Investment and Engagement Framework. During consideration of the matter the Committee also received a presentation from the Director of Responsible Investment and Engagement at LGPS Central. A copy of the report and presentation is filed with these minutes.

It was noted that since the Committee had approved a version of the LGPS Central's Responsible Investment and Engagement Framework in September 2017, a small number of minor changes had been made to the revised document.

Arising from the presentation, the following points were raised:

i)             The Framework would apply to assets which LGPS Central internally managed. Externally managed funds, including those owned by the Leicestershire Pension Fund would continue to operate in accordance with their own responsible investment policies.

ii)            Climate change was one of three key stewardship themes of the LGPS Central's Responsible Investment and Engagement Framework for 2018, along with diversity and cyber security. LGPS Central supported the Transition Pathway Initiative which assessed how companies were preparing for the transition to a low-carbon economy. The Pool was able to use this information when deciding whether to invest in companies and measure its existing asset exposure against such risks.

iii)           Should concern arise as to responsible investment practices of LGPS Central’s investments, there were a number of approaches the Pool could take in order to encourage change. They included communicating their concerns directly with the organisation and making representation at their AGM.

iv)            As part of the monitoring process, LGPS Central would work with fund managers to ensure they complied with the appropriate tax legislation.

v)             The Local Pension Committee would continue to receive updates concerning LGPS Central’s responsible investment work, including details of the Pool’s Stewardship report once published later in the summer.

RESOLVED:

That the Responsible Investment & Engagement Framework of LGPS Central be approved.

The Committee considered a report from the Director of Corporate Resources which provided an update on the progress towards the pooling of Leicestershire Pension Fund’s assets with 8 other schemes to form LGPS Central Ltd. A copy  of the report is filed with these minutes, marked ‘9’.

The Committee noted that whilst the pooling exercise would take several years to complete, elements of the pool, which included three internally managed passive funds, were launched on the 1 April 2018.  Until such time when all of Leicestershire Pension Fund assets were transferred to the Pool, LGPS Central would provide advisory services to the Fund where necessary. The Fund would continue to benefit from the support of its independent Investment Advisor and Hymens Robertson.

RESOLVED:

That the update be noted.

The Committee received a report of the Director of Corporate Resources which detailed potential risks relating to the management of the Pension Fund. A copy of the report is filed with these minutes, marked ‘12’.

It was noted that whilst a level of risk remained concerning the implementation  of a new administration system for the Pension Fund, which was expected to be in operation by December 2018, the authority was working in collaboration with Derbyshire County Council on resilience and efficiency to help ensure the transition was as smooth as possible.

In regards to the risks associated with the Fund’s investment performance (Risk 10), should the Local Pension Committee have concern over a particular pooled investment, it will have the ability to request that LGPS Central come before the Committee and discuss the issue.

Changes would be made to the risk register in order to add a risk associated with the transition of investment to the LGPS Central pool and to provide greater clarity as to the meaning of the  number ratings used to define the ‘Likelihood’ and ‘Impact’ of identified risks.

RESOVLED:

That the revised risk register of the Pension Fund be approved.

The Committee considered a report from the Director of Corporate Resources concerning the membership of the Investment Subcommittee for the period ending with the date of the annual Council meeting in May 2019. A copy of the report marked ‘14’ is filled with these minutes.

RESOLVED:

That the report be noted.

The Committee considered a report of the Director of Corporate Resources, the purpose of which was to present a summary valuation of the Fund’s investments at 31 March 2018. A copy of the report is filed with these minutes, marked ’10’.

It was noted that once the LGPS Central Pool was fully operational and managing the Fund’s investments, it was expected that the Committee would receive quarterly performance updates provided by the pool, rather than individual investment managers as was currently the case.

RESOLVED:

That the committee note the report.

The Committee received a report informing them of a decision made by the Director of Corporate Resources under delegated powers, relating to the expansion of the current hedge. A copy of the report is filed with these minutes, marked ‘13’.

The Committee noted that whilst the Fund actively managed its exposure to overseas currencies for equity investment by hedging some of its exposure back to sterling, the same measure had not been used for the Fund’s non-equity investments that have a foreign currency exposure such as private equity and infrastructure.  Officers and the Fund’s advisors were of the opinion that the Fund would benefit from an expansion of the currency hedge to include its unmanaged US Dollar exposure for non-equity investments.  This would mitigate the impact against any dramatic fall in the dollar’s value, which has an increased potential to occur due to the current account and budget deficit in the US. The change was made following consultation with the Committee’s Chairman and Vice Chairman.

RESOLVED:

That the report be noted.

The Committee received a report from Hymans Robertson updating the Committee on the Funding Update as at 31 March. A copy of the report is filed with these minutes, marked ‘11’.

RESOLVED:

That the update be noted.

The Committee received a report of the Independent Investment Advisor concerning current financial markets. A copy of the report marked ‘15’ is filed with these minutes.

It was reported that overall markets had performed strongly over the past year,  however the  poor weather experienced by Europe during the winter, coupled with the uncertainty over Brexit and the Italian elections had  resulted in a downturn in European market performance over the previous few months.

RESOLVED:

That the updates be noted.

The public are likely to be excluded during consideration of the following items in accordance with Section 100(A)(4) of the Local Government Act 1972 (Exempt Information).

RESOLVED:

That under Section 100(A) of the Local Government Act 1972 the public be excluded from the meeting for the remaining items of business on the grounds that they involved the likely disclosure of exempt information as defined in paragraphs 3 and 10 of Part 1 of Schedule 12(A) of the Act.

The Committee considered an exempt report by Kames Capital, a copy of which marked '17' is filed with these minutes. The report was not for publication by virtue of paragraphs 3 and 10 of Part 1 of Schedule 12(A) of the Local Government Act 1972.

RESOLVED:

That the report be noted.

The Committee considered an exempt report by Kleinwort, a copy of which marked '18' is filed with these minutes. The report was not for publication by virtue of paragraphs 3 and 10 of Part 1 of Schedule 12(A) of the Local Government Act 1972.

RESOLVED:

That the report be noted.

The Committee considered an exempt report by Ruffer, a copy of which marked '19' is filed with these minutes. The report was not for publication by virtue of paragraphs 3 and 10 of Part 1 of Schedule 12(A) of the Local Government Act 1972.

RESOLVED:

That the report be noted.

The Committee considered an exempt report by Pictet, a copy of which marked '20' is filed with these minutes. The report was not for publication by virtue of paragraphs 3 and 10 of Part 1 of Schedule 12(A) of the Local Government Act 1972.

RESOLVED:

That the report be noted.

The Committee considered an exempt report by Millennium Global, a copy of which marked '21' is filed with these minutes. The report was not for publication by virtue of paragraphs 3 and 10 of Part 1 of Schedule 12(A) of the Local Government Act 1972.

RESOLVED:

That the report be noted.

The Committee considered an exempt report by IFM Investors, a copy of which marked '22' is filed with these minutes. The report was not for publication by virtue of paragraphs 3 and 10 of Part 1 of Schedule 12(A) of the Local Government Act 1972.

RESOLVED:

That the report be noted.

The Committee considered an exempt report by Delaware Investments, a copy of which marked '23' is filed with these minutes. The report was not for publication by virtue of paragraphs 3 and 10 of Part 1 of Schedule 12(A) of the Local Government Act 1972.

RESOLVED:

That the report be noted.

The Committee considered an exempt report by JP Morgan, a copy of which marked '24' is filed with these minutes. The report was not for publication by virtue of paragraphs 3 and 10 of Part 1 of Schedule 12(A) of the Local Government Act 1972.

RESOLVED:

That the report be noted.

The Committee considered an exempt report by Legal and General,  a copy of which marked '25' is filed with these minutes. The report was not for publication by virtue of paragraphs 3 and 10 of Part 1 of Schedule 12(A) of the Local Government Act 1972.

RESOLVED:

That the report be noted.

The Committee considered an exempt report by Ashmore, a copy of which marked '26' is filed with these minutes. The report was not for publication by virtue of paragraphs 3 and 10 of Part 1 of Schedule 12(A) of the Local Government Act 1972.

RESOLVED:

That the report be noted.

The Committee considered an exempt report by Kempton Capital, a copy of which marked '27' is filed with these minutes. The report was not for publication by virtue of paragraphs 3 and 10 of Part 1 of Schedule 12(A) of the Local Government Act 1972.

RESOLVED:

That the report be noted.

The Committee considered an exempt report by Stafford Timberland, a copy of which marked '28' is filed with these minutes. The report was not for publication by virtue of paragraphs 3 and 10 of Part 1 of Schedule 12(A) of the Local Government Act 1972.

RESOLVED:

That the report be noted.

The Committee considered an exempt report by Aspect Capital, a copy of which marked '29' is filed with these minutes. The report was not for publication by virtue of paragraphs 3 and 10 of Part 1 of Schedule 12(A) of the Local Government Act 1972.

RESOLVED:

That the report be noted.

The Committee considered an exempt report by KKR, a copy of which marked '30' is filed with these minutes. The report was not for publication by virtue of paragraphs 3 and 10 of Part 1 of Schedule 12(A) of the Local Government Act 1972.

RESOLVED:

That the report be noted.

The Committee considered an exempt report by Aviva Quarterly, a copy of which marked '31' is filed with these minutes. The report was not for publication by virtue of paragraphs 3 and 10 of Part 1 of Schedule 12(A) of the Local Government Act 1972.

RESOLVED:

That the report be noted.

The Committee considered an exempt report by Colliers, a copy of which marked '32' is filed with these minutes. The report was not for publication by virtue of paragraphs 3 and 10 of Part 1 of Schedule 12(A) of the Local Government Act 1972.

RESOLVED:

That the report be noted.