Agenda item

The Committee considered a report of the Director of Corporate Resources which provided an update on the investing markets and how individual asset classes were performing, focussing on private debt, a summary valuation of the Fund’s investments as of 31 December 2022, and information on the levelling up government white paper with information on local investments, in particularly Leicester, Leicestershire and Rutland. A copy of the report marked ‘Agenda Item 7’ is filed with these minutes.

During presentation of the report, it was noted that:

i.         Summarised returns for the whole Fund versus benchmark was highlighted at point 14. In looking at one year figures, the Fund versus its benchmark was +1.7%, but it was worth noting that 2022 had been a difficult year, and -3.5% could be seen as positive from a year which had many negatives, including a sustained equity sell-off, a deteriorating bond market, falling global GDP, alongside rapid global central bank interest increases.

ii.         With regards to illiquid investments, there was enough liquidity in the Fund to pay calls on the Fund by managers.

iii.         An amendment to point 21of the report was read out to the meeting as follows:

“It has been a year since the Government published its policy paper, ‘Levelling Up the United Kingdom.’ The Levelling up and Regeneration Bill which takes the White paper forward requires the Secretary of State to prepare a statement of levelling-up missions to reduce geographical disparities in the United Kingdom and to report on these annually”.

iv.         An amendment to point 22 of the report was read out to the meeting as follows:

“Of note to Funds such as the LGPS, the paper suggests unlocking institutional investment in infrastructure, by asking local government pension schemes to publish plans for increasing local investment amongst other initiatives. The White Paper states, ‘There is huge potential for institutional investment to support levelling up, across infrastructure, housing, regeneration and SME finance. Institutional investors currently hold UK pension assets of over £3.5tn. Within that, the Local Government Pension Scheme (LGPS) has total investments of over £330bn, making it the largest pension scheme in the UK. Only a tiny fraction of these funds are currently allocated to local projects. If all LGPS funds were to allocate 5% to local investing, this would unlock £16bn in new investment.’  Although the term local investment is not defined in the paper, it was subsequently clarified by England and Wales LGPS’ Scheme Advisory Board that ‘in this context ‘local’ refers to UK rather than local to a particular fund and that there will be no mandation beyond the requirement to have a plan’ i.e. investments anywhere in the UK could be included in a levelling up plan”.

v.         Members requested that, based on the revisions to the report, and in understanding that the Secretary of State had stated that 5% of pension funds should be made available for local investment, that a further paper highlighting options on how funds be made available be brought back to a future meeting of the Committee. It was noted, however, with regards to practicalities, issues included the fact the LLR area was small geographically, and once assessed there may not be investment suggestions coming forward for fund managers to consider, plus there would be resource and staffing implications to assess projects.

vi.         It was reported that the Bill was before Parliament to be enacted later in 2023, around which time the government would issue statutory guidance which would assist the Committee in looking at how the duty or power might be implemented.

RESOLVED:

That the Summary Valuation of Pension Fund Investments be noted.