Agenda item

(a)  The Committee considered and noted the JGC agenda.

(b)  The Committee approved the attached draft WPP Business Plan, including the objectives of the pool on page 7 and the budget on page 13, relating to the period 2022/23 to 2024/25.

For the benefit of the new members, Mr Latham explained that previously the Fund set the investment strategy; decided how much was allocated to each asset class and selected a number of investment managers to deliver the strategy.  Apart from some legacy assets, the Fund does not now select their own fund managers as the Wales Pension Partnership (“WPP”) selects managers. 

Mr Latham confirmed the JGC appointed a new scheme member representative as outlined in paragraph 1.01.

He also highlighted in paragraph 1.01 that Dye & Durham were purchasing Link Group.  Link Fund Solutions provide WPP with back office infrastructure for the pooled investment vehicles WPP partner funds invest in. Mr Latham noted that it was unclear at the moment what would happen with Link Fund Solutions but the JGC and WPP were being updated on the matter.

Mr Hibbert said that private investors in Woodford (who were recommended by Link Group) were taking legal action against Link Group and asked if this was likely to affect the Fund’s services to WPP. Mr Latham said that the WPP confirmed this would not be the case, but Mr Latham recognised there were some risks, given that the Fund do not know the outcome or what actions the FCA would take. Mr Latham emphasised that WPP’s advisers, Hymans Robertson, had assured them that the FCA would become involved should anything happen to Link as a result of Woodford.

            The WPP officer-working group had set up several sub-groups for example, Mr Latham was involved on the risk management sub-group and Mrs Fielder was involved on the other two groups for private markets and responsible investment (“RI”). These were both complex areas and important for the Fund given that approximately 27% of the Fund’s assets were in private markets, and eventually any new commitments in this asset class would be made to the WPP private market sub-funds.

As identified from the report, there was a significant amount of work involved in these groups, especially regarding the private markets sub-group, given the appointments made in private credit and infrastructure. From next year, after the sub-funds were set up, private market investments will be  through WPP, for the various underlying allocators to determine how investments will be deployed.

            In addition, a significant amount of work was completed in relation to the responsible investment sub-group as outlined in paragraph 1.03 of the report. As reported at the last Committee, WPP were successful in becoming a member of the Stewardship Code. The Financial Reporting Council (“FRC”) highlighted suggested areas of improvement for WPP. As a result, an action plan was created ready for next year’s submission.

            The Fund had previously requested that WPP establish a Global Active Sustainable Equity sub-fund to help the Fund meet its investment objectives and Mr Latham updated the Committee on progress of this. Mercer provided views on progress reports provided by Russell Investments and the sub-fund structure would be recommended at the next JGC. After the recommendation at the JGC, approval would be required from the FCA who will go into detail to ensure there was no ‘greenwashing’ in the sustainability objectives for the sub-fund.

Mr Hibbert stated that the Fund could not be responsible investors if it did not hold the stocks at WPP because they have been lent out through stock lending. Therefore, as per the earlier point in the last minutes, he asked for the stock lending report to be provided. Mr Latham said there were two key reports, one from Robeco who are appointed by WPP and report on what voting and engagement with providers has taken place based on the WPP policies.  The other report is from Northern Trust on stock lending. Mr Latham clarified that he had a report which provided the information relating to WPP investments as a whole, but this could not currently be shared with the Committee, given that the Fund were invested in only 3 of the 9 sub-funds identified.  Mr Latham explained it would be his preference to share information relevant to the Fund but if that has not been developed by the next Committee meeting, the fuller report relating to all of WPP would be shared. In regards to Mr Hibbert’s general point on stock lending, Mr Latham confirmed this was being looked at by the WPP to ensure that stock lending was in line with WPP responsible investing principles and progress will be reported at future meetings.

Mr Latham then covered the following key points:

-       WPP had an inter-authority agreement between all eight funds which confirmed reserved matters that remained the responsibility of the funds to agree, one of which being approval of the annual business plan and associated budget.

-       Mr Latham highlighted the objectives from page 75 and confirmed they had not changed since the first business plan was created.

-       The training plan was shown on page 80 and the budgets on page 81 .

-       He noted that the external advisor budget had increased due to the recent appointment of Robeco, and also because Hymans Robertson as the Fund’s oversight advisor were completing extra work on private markets and RI.

Mr Hibbert asked whether the WPP and JGC believe that the Scheme Member Representative could be fully trained up in line with the training plan within their tenure. Mr Latham said it was hard to speak on behalf of the WPP but believed this was the belief with the intention that the Deputy would be the next representative.

Regarding the second objective on page 75, Mrs McWilliam asked whether the WPP were doing anything to monitor the savings being created by asset pooling. Mr Latham responded that it was difficult to measure but the WPP were required to periodically provide a report on this to DLUHC. The WPP look at funds individually and provide reports on whether they believe they are still providing value for money.

Mr Hibbert did not support the second recommendation in the report, as he did not believe the Scheme Member Representative training plan was achievable.

RESOLVED:

(a)  The Committee considered and noted the JGC agenda.

(b)  The Committee approved the attached draft WPP Business Plan, including the objectives of the pool on page 7 and the budget on page 13, relating to the period 2022/23 to 2024/25.