Agenda item

7.1       Ruby Vuong, Pension Fund Manager, introduced the report, outlining the Fund's market value which had decreased by £34.0m to £1.795bn in Q3 2023, resulting in a -1.5% net return. The Committee were informed that the underperformance against the benchmark by 1.9% net of fees was attributed to the Baillie Gifford Global Alpha Growth Paris Aligned Fund, countered by outperformance in Macquarie Renewable Infrastructure and Pantheon Global Infrastructure mandates.

7.2      The Committee were informed that over the past 12 months, the Fund underperformed by 2.7%, returning 7.5%, largely due to Abrdn Long Lease Property. The longer three-year period saw a 2.0% underperformance, returning 3.5%, with favourable ratings from Isio for fund managers.

7.3       Committee Members were informed that the London CIV had transitioned the underlying sub fund of the London CIV Absolute Return Fund from the Ruffer Absolute Return Fund into the LF Ruffer Thames Absolute Return Fund. It was also noted that the Pension Fund holds Rio Tinto within its Baillie Gifford Paris Aligned Equity Fund. With the company subject to engagement regarding water impacts at mining sites. Baillie Gifford has engaged with Rio Tinto on ESG practices, noting progress in decarbonisation but highlighting ongoing scrutiny. Officers also engaged on water company exposures, Abrdn performance, and Royal Dutch Shell's climate change risks. The Committee were informed that the Fund's estimated funding level remained stable at 160% at 30 September 2023.

7.4      The Committee were informed that the Fund's target asset allocation includes 55% in equities, 19% in fixed income, 11% in renewable infrastructure, 5% each in infrastructure and property, and 5% in affordable housing. Capital calls related to Quinbrook Renewables Impact mandate, Macquarie Renewable Infrastructure, and Pantheon Global Infrastructure. The Committee were informed that a 5% transition from equities to renewable infrastructure occurred in July 2023.

7.5      The Committee were informed that Westminster Pension Fund investments (managed by London CIV) as of 30 September 2023 were £786m, representing 44% of total assets. An additional £423m benefits from reduced fees through Legal and General's fee adjustment. London CIV's total assets under management were £27.4bn, with £14.8bn directly managed. All London CIV funds in which Westminster is invested were on normal monitoring at quarter end. The Committee were informed that during the quarter, London CIV conducted 70 meetings and engagements with Client Funds, including updates on investment consultants, pooling opportunities, and monthly business updates.

7.6       The Committee asked Officers if they felt that asset manager benchmarks, such as Man Group, were ambitious enough. In reply, Officers said that while it can appear unambitious, this is largely because fund managers will adopt a careful view to setting performance targets.

7.7       The Committee asked that if at the start of this year, scenarios on high levels of inflation and interest rates had been modelled. The Committee were informed that this would have been done as part of the strategic asset allocation review, to allow for potential mitigations to be put in place to protect the Fund.

7.8       The Committee asked if Officers present had faith in the strategy being undertaken by Baillie Gifford. In reply, the Tri-Borough Director of Treasury and Pensions said that the vast majority of Funds that Isio work with will have exposure to Baillie Gifford. The Committee were further informed that due diligence had been refreshed and although immediate events had not been favourable, the longer-term strategy has delivered fruitfully.