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Pension Committee - Thursday, 19th September, 2024 6.30 pm
September 19, 2024 View on council websiteSummary
The committee noted the performance of the investments made by the Camden Local Government Pension Scheme. They also noted the activities undertaken by the Local Authority Pension Fund Forum (LAPFF)1 to engage with companies in which the fund has invested, and they discussed the progress made by the London Collective Investment Vehicle (London CIV)2 towards procuring new funds, onboarding assets, and achieving the government's aims for pooling within the LGPS.
Investment Performance
The fund is valued at £2.12 billion. During the quarter, global equities performed well overall, driven by advancements in Artificial intelligence (AI)3 and favourable economic data. UK equities outperformed Global equities due to a stronger than expected increase in GDP and a decrease in inflation.
The fund has less exposure to fossil fuels than it did at the end of 2023, decreasing from 2.10% to 1.99% of all assets. Exposure to the Carbon Underground 2004 has also decreased from 1.42% to 0.98% of all assets.
Passive equity strategies outperformed active strategies over the last quarter, driven in part by the outperformance of the tech sector. Passive funds managed by Legal & General5 provided returns of almost 20%, while active funds managed by Baillie Gifford6 and Harris Associates7 delivered 15% and 6% respectively.
Underperforming Funds
Several funds underperformed against their targets.
Harris Associates: Performance has been poor for the last 5 quarters, and the fund is now 17.5% behind its target for the past 12 months. The committee will be raising this performance issue with the fund manager at a meeting in November.
Partners Group: 11 of their investments are below plan and may not deliver the expected return target.
London CIV Diversified Growth Fund: Performance has been poor in absolute terms and relative to its peer group, raising concerns with the committee.
CBRE: The Lendlease fund, which has consistently underperformed for the last three quarters, is being wound up. The Independent Adviser will report back to the committee on the performance of their other funds.
Harbourvest: The committee has asked the Independent Adviser to establish which of their funds are performing poorly after receiving contradictory information from the fund manager.
Legal & General: A higher than expected tracking error8 over the last 12 months was attributed to a change in the rules regarding recoverable withholding tax9 in Switzerland and Belgium. The fund manager was unable to explain what impact this would have on the value and performance of the fund.
Engagement
The committee noted the engagement activities undertaken by the LAPFF during the last quarter, which primarily focused on the following topics:
- Climate change and Environmental Risk
- Human Rights
- Water Stewardship
- Corporate Governance
- Decarbonisation in the Cement Industry
The majority of the companies engaged with were based in the UK. However, US, Canadian, Swiss, and Danish companies were also contacted.
The committee discussed how to measure the effectiveness of LAPFF engagements. They requested that officers highlight examples of successful and unsuccessful engagement activities.
The committee requested further information from the LAPFF on:
- The red flags that should be considered by investors when engaging with companies operating in conflict-affected and high-risk areas.
- Whether LAPFF has sent the letter to FTSE 100 companies asking them about their hHREDD10 processes.
- How responsive companies have been to requests for information.
London CIV
The committee noted the progress made by London CIV during the last quarter.
New Fund Launches
The London CIV has launched several new funds since the last committee meeting:
- Global Equity Value Fund
- All Maturities Buy & Maintain Credit Fund
- Private Debt Fund
- Nature Based Solutions Fund
- Real Estate Pooling Initiative
Assets Under Management
The London CIV has met its target of onboarding £1.6 billion of assets into private markets. It now manages £32 billion of assets:
- £15.7 billion in public markets
- £14.5 billion in passive equities
- £3.1 billion in private markets
Funds Under Monitoring
None of the London CIV funds in which Camden is invested are on a watch list or under enhanced monitoring. The Global Alpha Growth Paris Aligned Fund and the Mac Fund are both undergoing normal monitoring.
Other Business
The committee discussed their preference for future climate risk training sessions to be held separately from the regular committee meetings. They noted the resignation of Ros Alexander after 27 years of service to Camden Council, 7 of them as legal adviser to the committee, and welcomed back Joanne Reeves as the new legal adviser to the committee. They also welcomed Joyce Golder, the new Deputy Borough Solicitor.
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LAPFF is an organisation made up of Local Government Pension Scheme funds who collaborate to improve corporate governance and corporate responsibility amongst companies in which they invest. ↩
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The London CIV is one of eight pooled investment funds that have been created as part of the UK government's aim to reduce costs, gain economies of scale and improve governance within the Local Government Pension Scheme. ↩
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Artificial intelligence (AI) is intelligence demonstrated by machines, as opposed to the natural intelligence displayed by humans and animals. Leading AI textbooks define the field as the study of
intelligent agents
: any device that perceives its environment and takes actions that maximize its chance of successfully achieving its goals. ↩ -
The Carbon Underground 200 is a list of the top 100 coal and the top 100 oil and gas publicly traded companies, ranked by the potential carbon emissions content of their reported fossil fuel reserves. ↩
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Legal & General is a British multinational financial services and asset management company headquartered in London, England. It was founded in 1836. ↩
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Baillie Gifford is an investment management partnership headquartered in Edinburgh, Scotland. Founded in 1908, the firm manages investments on behalf of institutions, pension funds, financial advisers and private investors. ↩
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Harris Associates is an investment firm headquartered in Chicago, Illinois. Founded in 1976, the firm manages investments on behalf of institutions, pension funds and individuals. ↩
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A tracking error is the difference between the return an investment portfolio generates and the return of the benchmark against which its performance is measured. ↩
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Withholding tax is income tax paid to the government by the payer of income rather than by the recipient of the income. The tax is thus withheld or deducted from the income due to the recipient. ↩
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hHREDD is a process for identifying, preventing, mitigating and accounting for how a company addresses its adverse human rights impacts. It involves a process of assessing actual and potential human rights impacts, integrating and acting upon the findings, tracking responses, and communicating how impacts are addressed. It is widely accepted that hHREDD is necessary in conflict-affected areas to assess and mitigate the human rights risks. ↩
Attendees
Topics
No topics have been identified for this meeting yet.