Agenda item

The committee is asked to note the report.

22.1       The Head of Pensions presented the report which detailed the Fund’s funding position, market value, asset allocation, investment performance for the quarter ending 31 March 2023.

22.2       Members noted that by the end of the quarter to 31 March 2023, the Fund’s total market value had increased by £103.5m to £3,051.4m and over the quarter, total Fund assets produced a positive return of 3.4%, compared to a target of 2.8%, outperforming the strategic benchmark by 0.6%. It was reported that performance over the 3 years to 31 March 2023 was 9.9% annualised which is 0.8% ahead of benchmark. The fund was still regarded to be in a healthy position. 

22.3       In response to a question, members were advised that the average carbon intensity was a complex issues and would be addressed in a training session.  It was summarised that it considered the gases produced and weighted the average in relation to carbon, as defined in the Kyoto protocol. 

22.4       The Independent Adviser (IA) drew the committee's attention to page 29 of the report, which detailed the performance summary.  In the IA opinion, in terms of investment returns he felt it had been a positive quarter and the market had moved through peak inflation.  He added that energy prices were falling and the cost of food would decrease over time.  It was recognised that during Covid the majority of the population had saved money but he was cautious of a hard recession.  The IA recognised that inflation was a tax on the less well off, both in global and social terms and it needed to be brought under control as it could result in a polarised society. 

22.5       The IA continued to give a detailed presentation of his report and advised the committee that he expected interest rates to remain high.  It was noted that the long term assumptions would be updated in time for the Autumn meeting, overall he felt there were relatively good returns.

22.6       The Committee remarked that it appeared to be a positive quarter for Brunel and discussed the chart on page 79 of the report, it was noted that UK equities performance was mediocre.  The IA would continue to monitor its performance.  In response to a question, it was explained there was no intention to engage a third manager within the portfolio. 

22.7       A member wished to know if private debt/equity was a viable opportunity to consider.  The IA explained that was an interesting area and it was currently in a strong position but would require careful manoeuvres through choppy waters as the returns would be low for possibly two years

22.8       During the discussion it was noted that low interest rates by the banks had created a false environment and the situation could potentially get worse.  Members recognised that a potential government change in the next few years could have political ramifications.  It was suggested if there were any benefits in the fund looking at investments in UK assets, in an effort to get ahead of the curve.  The IA explained that rarely would Government direction add to investments and all political parties were looking at UK asset funds.  As an example, it was recognised that social housing would be less impacted by a recession as the demand would increase. 

22.9       Alex Walling, Key Audit Partner, Grant Thornton presented the external audit plan in detail.  Members were advised that materiality for the Pension Fund was £45m and any additional work would increase the fee.  A discussion ensued regarding materiality and triviality levels, the Head of Pensions explained that Internal Audit looked at the control mechanisms and External Audit may take that into consideration when compiling the audit plan.  Members agreed that a report distinguishing the roles of Internal & External Audit should be brought back to the September meeting. (Action MT) 

22.10   The current audit plan fee was £40,580 and this figure was set by the PSAA.  It was explained that value for money (VfM) was not produced specifically for the Pension Fund. 

22.11    The Committee requested that in the future of the report items should be tabled as separate agenda items.

22.12    Resolved

That the Committee notes in accordance with the regulations, the Fund’s position and governance activities as at the 31 March 2023 and requests such clarifications and further information from officers as may be required.

That the Committee noted the performance of the investments as detailed in report and associated appendices.

That Committee noted the Audit Plan for the financial year ending 31 March 2023