Agenda item

4.1           The Tri-Borough Director of Treasury and Pensions presented to the Committee with an update on the performance of the fund and that the market value of investments had decreased by £37m to £1.691bn over the quarter to 30 September 2022 with the Fund returning -1.8% net of fees. The Fund underperformed the benchmark by -0.4% net of fees, with the equity mandates and fixed income portfolios being the main detractors. This underperformance continues to be driven by the continued heightened inflationary concerns, alongside the supply chain disruption caused by the war in Ukraine and lockdown measures in China.

4.2      It was explained that this underperformance was partially offset by the outperformance of the benchmarks within the Abrdn Long Lease Property fund, Quinbrook Renewable Infrastructure fund and the Pantheon Global Infrastructure. These outperformed their individual benchmarks by 9.7%, 13.5% and 7.8% net of fees respectively.

4.3      Over the 12-month period to 30 September 2022, the Fund underperformed its benchmark net of fees by -3.8% returning -11.5%. This underperformance can be largely attributed to the Baillie Gifford (LCIV) Global Alpha Growth mandate, with the large-cap growth stock bias providing detrimental as investors sought safety in value-oriented parts of the market.

4.4      The Committee was informed that the Abrdn long lease property fund has again performed strongly over the one-year period, with an 28.2% outperformance of its benchmark net of fees. Pantheon Infrastructure fund, Quinbrook Renewables and Macquaire Renewables Infrastructure mandate have returned 37.3%, 23.7% and 23.7% net of fees, respectively.

4.5      The Tri-Borough Director of Treasury and Pensions noted that Deloitte continues to rate the fund managers favourably. However, a meeting was held between Deloitte and the senior management of Baillie Gifford to discuss the Baillie Gifford Global Alpha underperformance. Deloitte remains content that the manager continues to maintain its investment philosophy and Deloitte will continue to monitor the performance of the fund.

4.6      During August 2022, a decision was taken to note the investment policy of the London CIV Global Equity Quality fund. The revised policy states:

- Formalise the objective of achieving a lower greenhouse gas emissions intensity than the MSCI All Country World Index; and

- Extend fossil fuel and related omissions and introduce a GHG emissions intensity filter.

4.7      At the previous Committee meeting in October, the Committee elected to transition the Fund’s holding within the London CIV (Baillie Gifford) Global Alpha Equity  mandate into the BG Paris-Aligned version. The transition took place on 5 December 2022.

4.8      The Committee were further informed that the overall funding level has risen from 99% in 2019 to 128% in 2022, with the main drivers for this improvement being the significant investment returns and additional deficit         recovery payments received from the Council.

4.9      The position of the asset allocation was explained to the Committee, with the situation as follows: 60% in assets within equities, 19% in fixed income, 6% in renewable infrastructure, 5% within infrastructure, 5% within property and 5% to affordable and socially supported housing.

4.10    The Committee was informed of the value of the Fund LCIV assets being £839m, which represents 50% of Westminster’s investment assets. A further £358m continues to benefit from reduced management fees, through Legal and General having reduced its management fees to match those available through the LCIV.

4.11    The Committee noted that although recent performance represents an underperformance of the fund, many LGPS had suffered this, and Westminster Council is not an exception.

4.12    The Committee asked for confirmation from the Tri-Borough Director of Treasury and Pensions to confirm the Fund’s holdings within BG Alpha Fund had been transitioned into the BG Paris-Aligned version, and this was confirmed as having taken place on the 5^th of December 2022.

RESOLVED:

4.13    The Committee noted the performance of the investments.

4.14    The Committed approved that Appendices 2 and 3 to this report are not for publication on the basis that they contain information relating to the financial or business affairs of any particular person (including the authority holding that information) as set out in paragraph 3 of Schedule 12A of the Local Government Act 1972 (as amended).