Issue - meetings
Economic and Market Update and Investment Strategy and Manager Summary
Meeting: 09/02/2022 - Clwyd Pension Fund Committee (Item 37)
37 Economic and Market Update and Performance Monitoring Report 
PDF 105 KB
To provide Committee Members with an economic
and market update and performance of the Fund and Fund
Managers.
Additional documents:
- Enc. 1 - Economic and Markets Update, item 37
PDF 838 KB
- Enc. 2 - Performance report, item 37
PDF 295 KB
- Webcast for Economic and Market Update and Performance Monitoring Report
Decision:
The Committee considered and noted the update.
Minutes:
Mr Harkin announced that Mr Buckland had left Mercer to work for another LGPS Fund. Mr Harkin introduced Mr Dickson who had already been working on the Fund for a period of time.
Page 22 outlined the market update over Q4 2021 and the positive quarter for most growth assets, although he noted that emerging markets equities were down.
Mr Harkin added that the initial scare over the latest COVID-19 variant quickly dissipated as government and central banks were quick to respond. These actions had supported asset price rises over 2021. He noted that since the turn of the year volatility in markets had increased significantly and that geopolitical risk had contributed to this.
Currently, economies around the world were seeing significant levels of inflation, in particular the US and UK. Both the US Federal Reserve and the Bank of England had started to raise short-term interest rates in response. He believed that interest rates rises may be quicker than had previously anticipated but Mercer and the Fund would keep an ongoing dialogue on this matter.
As highlighted on page 43, Mr Dickson confirmed that the Fund performance was 4.7% over Q4 2021, which exceeded the benchmark of 4.2%. The 3-year figure reflected the performance from before the pandemic, throughout the pandemic and to current date. This figure was 11.9%p.a., which was also above the benchmark of 10.4%. The two actuarial discount rate targets of 3.8% and 4.3% identified the return the Fund require to make in order to stand still, and therefore the 3-year figure of 11.9% was significantly higher than the two actuarial targets and this outperformance had contributed to the improvement in funding level.
Mr Dickson noted from page 47 that the WPP Global and ESG Equity assets performed well and other areas of positive returns were from Total Tactical Allocation. Private Markets also produced strong returns of 22.4% over the year and the Cash and Risk Management Framework returned 33.6% over the same period.
The Chairman queried the forecast for future interest rates rises in USA. Mr Harkin noted that the market was expecting 4 to 5 rate rises from the US Federal reserve over the year, and that due to this, these had already been priced in by markets.
RESOLVED:
The Committee considered and noted the update.