The Joint Pensions Committee met on Thursday 21 September 2017, approving the Pension Fund Annual Report for 2016-2017 and agreeing to opt up to professional client status under the Markets in Financial Instruments Directive (MiFID II). The committee also noted progress on various general matters, including the transition of the Longview investment to the London Collective Investment Vehicle (CIV) and the fund's approach to environmental, social, and governance (ESG) policy.

Pension Fund Audit Report 2016-2017

Representatives from EY, the council's external auditors, presented their report on the pension fund accounts for 2016-2017. They anticipated an unqualified audit opinion, having identified no significant unadjusted audit differences. The committee noted the draft International Standard on Auditing (ISA) 260 report from EY and approved the published statement of the Pension Fund's accounts for the financial year ended 31 March 2017.

Pension Fund Annual Report 2016-2017

The Director of Resources introduced the Pension Fund Annual Report for 2016-2017, highlighting the positive financial performance of the combined fund and the inclusion of the actuarial valuation. The report detailed a number of complaints upheld under the Internal Dispute Resolution Procedure (IDRP), which Collette Hollands, Head of Pensions Shared Service, explained were often due to differing medical advice regarding ill-health retirement. Management Performance Indicators were also discussed, with the Assistant Director of Resources (Financial Services) acknowledging that the wording relating to deaths achieved could be phrased more sensitively. The report indicated that 96% of respondents were satisfied with the service received, though the time taken to resolve queries had sometimes been longer due to a large number of requests stemming from the Shared Staffing Arrangement. The committee approved the Pension Fund Annual Report for the year ended 31 March 2017.

General Matters

The committee received an update on key issues including hedging strategy, the transition of the Longview investment to the London Collective Investment Vehicle (CIV), training needs, Private Debt/Real Asset mandates, and fossil fuel investments.

Hedging Strategy: The committee agreed to follow Option 2 for placing a currency hedge, adjusted to minimise the procurement process with the assistance of Mercer's.

Longview Transition: The committee noted that the Fund's investment in Longview had been transferred to the London CIV on 17 July 2017.

Training for Members: It was agreed that all members of the Joint Pensions Committee would complete self-assessment forms against the CIPFA knowledge and understanding framework to identify further training needs. The Assistant Director of Resources (Financial Services) would circulate the appraisal document and details of necessary evidence. Additional training, including online options, could be arranged as needed. The committee would receive a report on Member training at their next meeting.

London CIV Progress: Councillor Heaster expressed concern about the slow progress of the London CIV, with only nine funds currently under its management and uncertainty regarding manager appointments. The Director of Resources advised that the option of joining with other boroughs to procure support for developing private debt and real asset investment options would be explored to reduce fees. The committee delegated authority to the Director of Resources to undertake a manager selection search using advisers as required.

Fossil Fuel Investments: The committee noted the update on fossil fuel investments and that all Fund Managers are expected to adhere to the Stewardship Code in the Investment Strategy Statement.

The committee resolved to note the progress with hedging currency risk, delegate authority to the Director of Resources for manager selection, agree the approach for Member Training, and note the Fund's approach to Environmental, Social, and Governance (ESG) policy.

Impact of the Implementation of the Markets in Financial Instrument Directive (MiFID II)

The Director of Resources introduced a report outlining the impact of MiFID II, which requires the fund to opt up to professional client status before 3 January 2018. The committee agreed to the immediate commencement of applications for elected professional client status with all relevant institutions, acknowledging and agreeing to forgo the protections available to retail clients. Authority was delegated to the Director of Resources to complete these applications and determine the basis of the application.

Pension Fund Investment Performance

The Director of Resources presented a report summarising the performance of pension fund investments to 30 June 2017. Councillor Daley queried the annualised percentage figures for three-year returns, which were confirmed as correct, including a 20% return for Longview due to its stock selection bias. Councillor O'Malley inquired about the effect of currency hedging, with the Assistant Director of Resources (Financial Services) noting that only a portion of the Legal and General Investment Managers' Fund had been hedged recently. Councillor Heaster commented that the number of funds listed would need to be rationalised. The committee resolved to note the investment performance and to focus on Member training at the next meeting, with no fund manager attending.

Presentation from Fund Manager (Longview)

Marina Lund and Alistair Graham from Longview provided an update on their portfolio's performance. Following their presentation and subsequent questions from committee members, the committee discussed the issues raised. The Chairman suggested continuing to receive presentations from fund managers despite the transition to the London CIV, a sentiment echoed by the Assistant Director of Resources (Financial Services), who emphasised the importance of maintaining these relationships for long-term clients. The committee resolved to receive the report as information.