Decision details

Kieran Harkin, Fund Investment Consult – JLT Group, presented the report on the Proposed Investment Strategy Review: Initial Update.. He highlighted a significant review of the strategy had been completed in 2014 and he would not expect to see significant changes at this time but the strategy should be reviewed in light of the 2016 valuation results and to take into accounting asset pooling.

            Mr Harkin highlighted the three key considerations as being:

(i)            Reduce equity risk as a proportion of total risk in the short (immediate) term

(ii)          Increase the illiquidity premium  in the medium to longer term

(iii)          Maintain the Fund’s Flightpath/De-Risking Framework though Mr Harkin highlighted that a review of this overall structure is still ongoing

The report details considerations relating to phasing to the new investment strategy and Mr Harkin noted they would need to consider fees, transition costs, manager selection and the impact of the Wales Pool.  He did confirm that he expected the overall level of fees for the proposed strategy to be broadly in line with those currently paid, though this excludes any assessment of potential fee impact of moving to the All Wales Pool given there is currently no clarity on underlying mandate charges that could apply.

            He highlighted that the proposed strategy review would have an expected return increasing from the current strategic portfolio of  6.4% to 6.5%,  but this excluded the post Brexit JLT Market Forecast assumptions on expected asset returns. Mr Harkin confirmed that the revised post Brexit Market Forecast assumptions would be incorporated into the final modelling output that is due to be undertaken when the review of the Fund’s Flightpath/De-Risking Framework is complete.  He confirmed the expected return exceeds that assumed in the Funding Strategy Statement that is currently being considered.

            Mr Harkin then confirmed that the drafting of the Investment Strategy Statement incorporating these changes and which will be to replace the existing Statement of Investment Principles would be carried out in advance of the 1 April 2017 deadline.

RESOLVED:

That the report be noted and agree the proposed initial changes to the Fund’s Investment Strategy.