The Pensions Committee of Bromley Council met on Thursday 23 May 2024 to review the performance of the Pension Fund and receive updates from investment managers. The committee noted the fund's performance and discussed various investment strategies and market conditions.

Pension Fund Performance Q4 2023/24

The committee received a comprehensive report on the investment performance of Bromley's Pension Fund for the fourth quarter of the 2023/24 financial year. The fund's market value stood at £1,440.6 million at the end of March 2024, an increase of £107.6 million from the previous quarter. Overall, the fund achieved a return of 11.08% for the financial year, although this was slightly below its benchmark of 13.37%.

The report detailed the fund's performance against its benchmarks across various asset classes and managers, including Baillie Gifford, Fidelity, MFS, and Schroders. While some portfolios, such as the MFS Global Equity fund, underperformed their benchmarks in the short term, the committee noted the fund's strong long-term performance, with a 30-year average return of 8.5%.

Discussions also touched upon the broader economic climate, with the Senior Advisor: Apex Group Ltd highlighting that global equity markets had continued to rise, driven by expectations of interest rate cuts. However, inflation remained a concern, particularly in the US, leading to a recalibration of rate cut expectations. The committee was advised that while the UK and European economies were showing signs of slowing, the US economy had demonstrated greater resilience.

Presentation from Fidelity International

Representatives from Fidelity International, Tom Jeffery and Talib Sheikh, provided an update on the London Borough of Bromley Pension Fund's investments. They discussed the 'Mansion House' pension reforms, which signal a move towards increased investment in UK equities. Fidelity's perspective was that while UK large-cap stocks had performed well, mid-cap stocks had been slower, and the firm generally maintained a global equity perspective.

Concerns were raised about the inclusion of tobacco stocks, with Fidelity stating they tend to leave this market to specialist investors. A member also requested that future reports include net figures to provide a clearer understanding of actual investment performance. There was a discussion regarding the strategic asset allocation, with a member expressing concern about increased equity investment, as the portfolio was intended to diversify away from equities to mitigate risk. Fidelity responded that equities offered a valuation cushion and attractive yield as part of a diversified mix.

The presentation also touched upon the likely direction of interest rates, suggesting a reduction in the short to medium term, though this was subject to uncertainty due to the UK General Election. Emerging markets were considered a potential area for medium to long-term opportunities, particularly in debt. Fidelity also explained that a reduction in investment in alternatives was due to recent struggles in that sector, but that alternatives would remain an attractive investment option.

Updates from the Chairman/Director of Finance/Pensions Investment Advisor

The Chairman, Director of Finance, and Pensions Investment Advisor provided an update on recent pension-related developments. The Director of Finance reported that Chief Financial Officers had received a letter from Simon Hoare MP, Minister for Local Government, requesting information on efficiencies in LGPS fund management and asset pooling. The proposed March 2025 deadline for pooling all listed assets was noted as being potentially incompatible with existing timescales for actuarial valuations and strategic asset allocation, and could lead to additional costs.

The Chairman highlighted that he had raised concerns about merging funds with the Department for Levelling Up, Housing and Communities, stressing that these were not public funds but belonged to the Scheme Members. He also expressed concerns about government engagement with Collective Investment Vehicles when Local Authorities are responsible for managing LGPS funds. A member suggested engaging with stakeholders such as trade unions, a proposal supported by the Chairman, in light of potential changes to future LGPS arrangements following the upcoming General Election.

Task Force on Climate-related Financial Disclosures (TCFD)

A question from Gill Slater, Local Pension Board Member, regarding training on climate change and TCFD reporting was addressed. The committee acknowledged the importance of understanding responsibilities in this emerging area. The Director of Finance advised that the government was expected to consult stakeholders on new regulations from late June 2024, which would likely include training provisions. The Chairman requested a further update on progress at the next meeting and agreed that a dedicated TCFD session would be held on 14 November 2024. Members were recommended to review the Pensions Regulator Review 2023 and TCFD reports from Smart Pensions Master Trust and Oxfordshire LGPS for further information.

Questions from the Public

Two questions for written reply were received from the public. One, from Gill Slater, concerned training on climate change and TCFD reporting. The reply stated that training requirements would be assessed alongside awaited regulations, and options developed by the London CIV would be explored. The second question, from Daniel Sillman, asked for elaboration on the strict rules and regulations compelling the Pension Fund to invest in Israeli weapons and aerospace companies, and to prevent complicity in alleged actions in Gaza. The response reiterated that the committee is an investment committee, not the UN, and that investments comply with current legislation and government requirements for pension investments, which are publicly available.