Issue - meetings
Investment Strategy Review Including Responsible Investment Policy
Meeting: 28/11/2019 - Clwyd Pension Fund Committee - currently one vacancy for Denbighshire County Council (Item 88)
To provide Committee Members with the results
of the Investment Strategy Review and agree the strategic asset
allocation and the Responsible Investment Policy for
- Enc. 1 for Investment Strategy Review Including Responsible Investment Policy, item 88 PDF 21 KB
- Enc. 2 for Investment Strategy Review Including Responsible Investment Policy, item 88 PDF 49 KB
(a) The Committee agreed the proposed Strategic Asset Allocation (as shown in paragraph 3.02) of the Fund as a basis for consultation with the Fund’s Employers.
(b) The Committee considered and agreed the Responsible Investment Policy as the basis for consultation with the Fund’s Employers.
Mr Latham expressed the importance of Strategic Asset Allocation as the results of the next Actuarial Valuation will be affected by the decisions that are made today. Fortunately, the Fund is starting with a well-diversified strategy therefore the amendments are more of a minor procedure than major surgery. He outlined that the Committee were being asked to agree the proposed changes to the strategy at this meeting and then the Investment Strategy Statement would be brought for approval at the February Committee.
Mr Harkin presented the proposed revisions to the Strategic Asset Allocation expressing the following key points;
- The Fund are better funded today however; the Fund are still in deficit therefore we need to invest to achieve the required level of return.
- The integrated approach means getting the right balance of Investments, Funding and Covenant. The Fund are ahead of other funds as the Flightpath strategy is already in place, whereas other funds are just beginning to think about risk management.
- The key is to focus on a longer term returns, by setting an asset allocation based on Mercer’s 10-year market forecasts.
- Private markets have been very successful for the Fund; the challenge is to ensure that we can continue with what we have.
- Expected returns are generated through statistical analysis by Mercer. Mercer will have forecasts which may not always play out but its ensuring that the asset allocation is effective.
Mr Harkin explained that the current investment strategy set in 2016 was expected to deliver 6.1% p.a. based on market forecasts at that time. However, based on 2019 market views the expected return would reduce to 5.4% p.a. The message is to expect a lower return going forward. Therefore, it will be necessary to ensure that the asset allocation is capable of achieving a return in excess of the Actuary’s discount rate i.e. CPI plus 3.2% which has been proposed. Mr Harkin expressed that the current climate in relation to investments is very uncertain so it is important to focus on the long term path, but this will be more difficult going forward.
Mr Harkin explained that the key proposals were shown in the covering report and the presentation but also briefly summarised them as;
- Invest more in emerging markets.
- Disinvest completely from Diversified Growth Funds.
- Restructure the Hedge Fund mandate.
- Re-categorise Private Markets, and;
- Create Local/Impact investments portfolio.
- Review Cash and Risk Management Framework (CRMF).
Councillor Bateman asked what Impact Investments are. Mr Buckland said that these investments look to make a positive contribution to society in addition to meeting investment risk/return requirements. Responsible investment is about ensuring long term sustainability, however, Impact Investments are the next stage, where the focus is to make a positive impact and generate returns for the Fund.
Mr Hibbert queried how the Fund are going to record and report the impact. Mr Buckland said that they are currently considering how best to do that, and it will be articulated within the Responsible Investment Policy, after ... view the full minutes text for item 88