This meeting was about the Islington Council Pension Fund. It included presentations and discussions on the fund’s performance, the adoption of an updated investment strategy, and on funding matters.

Funding Position

The meeting included a discussion of the estimated funding position of the Pension Fund since its last triennial actuarial valuation, which took place in March 2023. The report pack included a summary of the discussions that were scheduled to take place at this meeting, including commentary by the fund actuary, Mercer, on:

“Gilt yields have risen materially over the last 12 months, which has led to many stochastic models pointing to a significant increase in expected future investment returns, and therefore the valuation discount rate. If such higher discount rates are applied mechanically without adjustment, this results in potentially material funding improvements being recognised at the current time - despite falls in asset values.”¹

The report pack also included an update on the timeline and the topics scheduled to be discussed ahead of the next triennial valuation, which will take place in March 2025.

Pension Fund Performance

The committee was scheduled to receive a presentation on the performance of the Islington Pension Fund between 1 April and 30 June 2024. The report pack included the schedule for the discussion, including commentary on the performance of the individual fund managers. The report pack included a presentation by Apex Group, who act as the Council's independent investment advisors. The presentation gave an overview of each of the fund managers' performance, risk, and personnel changes. It noted that the Polen Capital fund, which invests in emerging markets, had performed poorly since its inception in 2017, underperforming its benchmark by -3.9% per annum. It also noted that the Hearthstone fund, which invests in UK residential property, had been terminated and was being liquidated.

The report pack included commentary from the Corporate Director of Resources noting:

"The total fund performance compared to its peer group as at fiscal year- end 31st March is attached as Appendix 2 for information. The longer-term performance compared to the median and rankings is shown in the table below.

	3year p.a	5year p.a	10year p.a	20 year p.a
Islington fund	5.5%	7.2%	7.4%	7.1%
Average fund	5.3%	6.5%	7.6%	7.7%
Ranking	(33)	(20)	(53)	(82)
CPI	6.9	4.5	3.0	2.9

The report pack included an analysis of the whole fund’s performance relative to its peers. This was prepared by PIRC. It included a risk/return analysis of the fund relative to other Local Government Pension Schemes over the last 5 years.

Investment Strategy Update

The committee were scheduled to receive a progress report on the implementation of its updated investment strategy. It included a discussion on the appointment of an active emerging market portfolio manager, the selection of impact investments, a gap analysis of the Private Debt portfolio, and the proposed investment of the Natural Capital allocation with the London CIV.

The report pack included a schedule for a discussion on a briefing paper prepared by Karen Shackleton of Pensions for Purpose. The paper provided research on potential private markets investment managers whose strategies align with the following themes:

• Inclusive economy/supporting UK SMEs
• Regional UK (London/South East)
• Biotech/life sciences focus

The committee was scheduled to agree a shortlist of these funds, which would then be subject to further due diligence.

Restructuring Passive Equity Portfolio

The committee were scheduled to receive an update on the restructuring of its Passive Equity Portfolio. The update proposed to consult with Pension Fund members on:

“options for changing the structure and benchmark of the Pension Fund’s passive equity portfolio, as detailed in the report of the Corporate Director of Resources, to ensure that companies on the UN’s list of businesses involved in activities in the Occupied Palestinian Territory deemed compliant in human rights abuses should be excluded from the Fund’s investments.”²

The report pack includes a schedule for a discussion to instruct the Corporate Director of Resources to consult with members of the Pension Fund on the proposed restructuring. This would include an equalities impact assessment to consider whether the proposed exclusions would have a disparate impact on members with protected characteristics.

The London CIV Update

The committee were scheduled to receive an update on the progress made at the London CIV over the period June to August 2024. It included details of their proposed new funds and their financial and operational activity.

Annual Pension Fund Report 2023/24

The committee were scheduled to review the draft annual report and accounts for the Islington Pension Fund. The draft report pack included a discussion on the statement of accounts, the fund’s activities, and performance to March 2024. It also included information about the Local Government Pension Scheme. The report pack included a summary of the draft annual report, which was scheduled to be distributed to pension members at the Annual General Pension Meeting scheduled for 30 September 2024.

Annual Review and Progress on the 2022 - 2026 Pension Business Plan

The committee were scheduled to review the progress on the Pension Fund Business Plan. The report pack contained the schedule for the discussion and an appendix listing the key objectives and actions agreed in the current four-year business plan, and the progress against them. It included the following objective:

To continually improve our administration and governance in order to deliver an excellent and cost effective service to all fund members.

Pensions Committee 2024/25 Forward Work Programme

The committee were scheduled to discuss their work programme for 2024/25. The report pack contained the agenda for that discussion and an Appendix detailing the proposed meeting schedule and topics for discussion. It also listed the recent training that members have received in advance of meetings.