Agenda item

The Investment Fund Manager presented the standard report on the Fund’s performance during the period 1 July to 30 September 2023, including details of the performance of individual Fund Managers. The Committee also received a verbal update on the unaudited performance of the Fund up to December 2023. The update showed a reduction in the value of the Fund driven by significant increases in pension payments over the past two years affected by high levels of inflation as reflected in a funding level update provided by Barnett Waddington, the Fund Actuaries. Consequently, the overall value of the Fund had fallen below 100%, something the Committee needed to be mindful of as the Fund moves towards the next full triennial valuation expected to be carried out by 31 March 2025 with new contribution rates set from 1 April 2026.

The report included the Committee’s Independent Advisor’s market background for Q3 alongside which the Committee received a commentary from Nick Jellema, Hymans Robertson as to the current economic market position. 

Looking at the overall performance of the Fund and its closing value at Q3, reference was made to a short-term loan of £5.8m. The Investment Fund Manager explained that there were lots of asset movements between Fund Managers and as the Fund did not hold a significant amount of cast the loan was taken as a short-term arrangement only.

Looking at the performance of individual Fund Managers it was noted that the returns from Baillie Gifford were not particular strong when viewed over both one and three years.

The Investment Fund Manager responded that when considered over the preceding 10-year period they had matched the benchmark. However, acknowledging the more recent poorer performance it was noted that LCIV were monitoring the situation, and it may well be that along with a number of other underperforming managers it would be prudent to arrange to meet with Baillee Gifford to discuss their performance records. However the Investment Fund Manager was at pains to state that overall the Fund was performing well.

In noting the current economic outlook Hymans Roberson were asked to speculate about the future direction of the Base Rate? Nick Jellema supported the market expectations that there were likely to be a series of modest percentage point reductions in the Base Rate over the coming year, which depending on quickly the rate of inflation drops, could see a rate of around 4%/5% by the end of 2024/early 2025.

Clearly this will be dependent on many world factors such as the ongoing war in Ukraine together with the continued underlying effects brough about by the pandemic, the overall consequences of which could potentially disrupt commodity markets and in turn push up inflation. John Raisin, the Independent Advisor affirmed the view that the Bank of England would remain cautious as to the timings and size of any reductions in the Base Rate. 

The Committee noted:

(i)  The progress on the strategy development within the Pension Fund,

(ii)  The daily value movements of the Fund’s assets and liabilities

  outlined in Appendix 1 to the report,

(iii)  Funding levels update from Barnett Waddingham, and the

(iv)    The quarterly performance of the Funds collectively and that of Fund

  Managers individually.