Issue - meetings
Funding and Flight Path Update
Meeting: 05/09/2018 - Clwyd Pension Fund Committee (Item 28)
28 Funding and Flight Path Update 
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To update Committee Members on the progress of
the funding position and liability hedging undertaken as part of
the Flight Path strategy for managing liability risks.
Additional documents:
Decision:
(a) The Committee noted the updated funding and hedging position for the Fund and the progress being made on the various elements of the Risk Management Framework.
(b) The Committee noted the LDI strategy is in the process of being restructured in order to crystallise the positive mark-to-market gain.
(c) The Committee noted that the Officers are working with their advisors in order to identify possible areas to invest the £100m cash that may be released due to the overall positive performance of the flightpath framework.
Minutes:
Mr Middleman gave the Committee a funding update and confirmed that at the end of March the funding level was 89% whereas at the end of July it was 92% and remains broadly the same now which is good news for the Fund.
He explained that Mercer is currently working on an Interim Funding Review for the Fund covering modelling on what inflation and investment returns (above inflation) are expected to do in the future given the current political and economic uncertainty. The outlook (if lower) would manifest itself by a reduced funding level. The outcome of the interim funding review will be reported at the next Committee and will be presented at the AJCM.
Mr Middleman then summarised the activity on the Flightpath strategy. Again no yield triggers have been breached since the interest rate triggers were re-structured. However market volatility may lead to some triggers levels’ getting closer to being breached and this is closely monitored by Insight.
The Flightpath Strategy has performed well and along with closing out the relative value trade means that there is an opportunity to release some collateral, possibly up to £100 million to invest elsewhere or be made to work harder in the Insight mandate. It was noted that this doesn’t change the risk position or exposures in the flightpath strategy. The options will be discussed in the coming weeks and be reported back to Committee.
Mr Middleman’s final update covered the new dynamic equity strategy that was implemented on 24 May 2018. This protection will follow the movements of the markets on a rolling 12 months period. The dynamic protection strategy will currently protect the Fund if equity markets exposure in the Insight vehicle falls by 15% on average. The reduced risk exposure will be taken into account when looking at employer deficit contributions which may mean a reduction could be passed on (all other things equal) which is the primary reason for implementing the protection.
The Chairman added that it is positive to hear of the ongoing success of the Flightpath strategy.
RESOLVED:
(a) The Committee noted the updated funding and hedging position for the Fund and the progress being made on the various elements of the Risk Management Framework.
(b) The Committee noted the LDI strategy is in the process of being restructured in order to crystallise the positive mark-to-market gain.
(c) The Committee noted that the Officers are working with their advisors in order to identify possible areas to invest the £100m cash that may be released due to the overall positive performance of the flightpath framework.