Issue - meetings

The Committee noted and considered the contents of the report.

The Chairman highlighted from the report that for the first time since Flintshire County Council became the administering authority, the Fund exceeded 100% funding level and was at 102% as per the report.

            Mr Latham was delighted to report the fully funded position and confirmed that the Fund had grown from £300 million in 1996 to £2.1 billion now.  He noted to the Committee that the history of the funding position was in the later investment and funding update item from Mrs Fielder.

He stated the following key points regarding the Fund’s road to a fully funded position:

-       He believed a key reason for the success was the management of the Fund via the flightpath and risk management framework that is operating as expected.

-       This has been achieved by the Fund through a diversified and lower risk portfolio.

-       The level of hedging for inflation and interest rates has benefited the Fund positively.

-       The equity protection provides an insurance, albeit this hasn't actually been needed given markets have continued to rise. 

-       By hedging the currency risk, the Fund gained £15.8 million since inception of this strategy.

-       Another positive was that a further £100 million of collateral can be released whilst maintaining the same overall risk/return. This additional funding could be used for commitments to sustainable private markets assets in the future..

            Mr Middleman noted that, as the funding level is over 100%, it had been agreed that consideration would be given to whether risk should be reduced further and, if so, what would be the implications for returns and ultimately the level and stability of employer contribution requirements.   Mr Middleman explained the next steps in terms of considering any actions that should be taken and this will be discussed at the next FRMG meeting. On page 31, item 1.07 outlined potential next steps and actions for consideration which included doing nothing, reducing the equity exposure and/or  increasing the hedging levels – in particular for inflation given the current uncertainty. 

            Mr Middleman confirmed that the funding level had continued to improve and was currently estimated to be around 103%.

            Mr Everett asked how typical the Fund’s financial position was against other LGPS Funds and other pension funds generally. Mr Middleman confirmed that this was linked to the strategy for each Fund.  For example, other pension funds who had a higher equity allocation, would have seen a bigger improvement in funding position and vice versa. However, the Fund will have more stability compared to other pension funds, due to the protections in place e.g. the level of hedging and equity protection strategy.  There is therefore likely to be less “boom” and “bust” type scenarios.

            Mr Everett believed that if the Fund remained in a fully funded position at the next triennial valuation, considerations would need to be made around whether employers' contributions could be contained or reduced given fiscal challenges for employers in balancing their budgets. Mr Middleman agreed that this is a consideration and added that  ...  view the full minutes text for item 5