The Pensions Committee of Barking and Dagenham Council met on Wednesday 20 March 2024 to review the fund's performance and governance. Key decisions included the renewal of the Independent Advisor's contract and the approval of changes to the fund's investment strategy following the acquisition of Abrdn's private equity business by Patria Investments.

Quarterly Monitoring 2023/24 - 1 October to 31 December 2023

The committee received a comprehensive report on the Pension Fund's performance for the period 1 October to 31 December 2023. The Investment Fund Manager presented the fund's performance, noting a positive quarter with the fund returning 5.1%, outperforming its benchmark of 4.5%. However, over one, three, and five years, the fund had underperformed its benchmark. The report also included commentary on the market background from the committee's Independent Advisor, John Raisin, and David Walker from Hymans Robertson (HR). Discussions touched upon inflation rates, the cooling property market, and the future of office spaces. HR speculated that inflation would likely reduce further towards the Bank of England's 2% target, but warned against dramatic movements due to labour market pressures. Regarding the property market, structural issues predating the pandemic were noted as being accelerated by shifts towards online retail and remote working.

The committee also discussed the reasons for a short-term loan of £14.5m to the Council, which was attributed to the Council's Treasurer's setup for maximising money market investments, yielding a return of around 5.2-5.3%. Concerns about the underperformance of several fund managers were addressed by the Investment Fund Manager, who emphasised the importance of a long-term view and the plan to review benchmarks to make them more realistic. The committee noted that overall equalities tend to outperform other asset classes, and corrective action would be taken if they moved outside acceptable ranges. The expected employer contribution rates for the next three years were discussed, with the view that they were unlikely to reduce significantly due to recent pension increases driven by high inflation. Concerns about an indirect relationship with fund managers due to the increasing involvement of the London CIV were also raised, though it was noted that officers maintained good working relationships with most managers.

The committee noted the progress on strategy development, daily value movements of assets and liabilities, and the quarterly performance of pension funds and individual fund managers.

Administration and Governance Report

Jesmine Anwar, Pension Fund Accountant, presented an update on administrative and governance changes and their potential impact on the Pension Fund. The report included the fund's one and three-year cashflow forecast, an update on the London Collective Investment Vehicle (LCIV) as the fund moves towards more pooled investments, and a review by Barnett Waddingham on the strain factors arising from members taking unreduced early retirement.

Two questions were raised concerning the fund's cash flow status and augmentation factors related to early retirements. A written response was promised for these queries. The committee noted the report.

Independent Advisor - LGPS Update

John Raisin, the committee's Independent Advisor, provided his quarterly update on the Local Government Pension Scheme (LGPS), focusing on The Pensions Regulator's (TPR) proposed General Codes of Practice, specifically Code of Practice No. 14: Governance and Administration of Public Service Pension Schemes. The Code was due to come into force on 27 March 2024. TPR aims to establish comparable standards across pension schemes. The LGPS Advisory Board for England and Wales (SAB) is committed to assisting funds in understanding new requirements.

The Independent Advisor recommended that the committee assess the fund's compliance with the TPR General Code, develop a plan for necessary changes, and attend relevant seminars. The Investment Fund Manager confirmed that officers had already undertaken significant work and expressed confidence in meeting compliance requirements, with an action plan to be prepared. The committee noted the report.

Business Plan 2024-2026

The committee received a report on the progress of the 2024-2026 Business Plan actions. Member training was highlighted as a key element, with a structured approach outlined for the coming years. The committee noted the report.

Appointment of Independent Advisor

The committee resolved to extend the appointment of John Raisin Financial Services Limited as the Independent Advisor for the Council's Pension Fund for a further one-year period. The fee was agreed to be increased to reflect inflationary pressures. The Investment Fund Manager will conduct a market review before the committee reconsiders the appointment next year.

Abrdn Update

Following a training session on private equity, the Pension Fund Accountant provided an update on structural changes at Abrdn, including the sale of its Private Equity business to Patria Investments. The committee resolved to agree to the acquisition of Abrdn's Private Equity business by Patria, the subsequent transfer of the fund's private equity investments to Patria in April 2024, a £10m cash transfer to Patria, and amendments to the strategic asset allocation. The removal of currency hedging from the remaining hedge fund and private equity portfolios was also agreed.