Agenda item

[To present the quarterly investment report]

Jill Davys, Assistant Director, Investments and Finance presented the report on a range of investment issues, primarily the market and investment background and the quarterly performance of both the West Midlands Pension Fund and the West Midlands Integrated Transport Authority Pension Fund. Supporting responsible investment activities were covered in a separate paper on the agenda for the meeting.

Councillor John Reynolds suggested a slight amendment to the future presentation of the table on WMPF asset class, in order make clearer the assets that fall within ‘stabilising assets’

Councillor Bally Singh asked how the Fund was performing against benchmarks and whether the Fund was investing in emerging markets such as Africa. The Assistant Director confirmed that the Fund reported its performance against benchmarks similar to those adopted by other Funds in the public and private sector. Benchmarks are routinely reviewed to ensure they remain appropriate and following significant change in the portfolio during 2018/19, the current review is expected to lead to some change, with outcomes to be reported to Committee in September. Regarding the emerging markets, the Fund had some exposure and has been holding an overweight position in emerging market equities. There is no specific allocation to Africa but regional opportunities and how the Fund accesses these, will be reviewed with the Investment Advisory Panel, as they arise.

Councillor Jane Stevenson asked whether the weakness of the retail sector throughout 2018 and so far this year has necessitated altering the property strategy towards the sector going forward and whether offloading of retail assets were planned.  The Assistant Director acknowledged the concern and agreed the position was under consideration as part of the investment strategy but that the Fund had benefited from being significantly underweight in the retail sector. The Assistant Director went on to reference some recent purchases as part of the portfolio confirming the Fund would only make acquisitions in the retail area when the assets met strict investment criteria, including level of expected yield. In terms of the overall strategy for the retail sector, it was one of caution. 

Referring to the Fund’s cash balances, Malcolm Cantello, Unison asked whether the Fund should consider changing the target percentage for the level of cash it held. The Assistant Director reported that the Fund expected cash balances to move slightly above or below the 2% policy target. Aside from this, balances were considered in the context of potential collateral requirements for the currency hedging programme and the returns available on short term deposits.

Councillor Milkinder Jaspal noted that in difficult times it was good to hold cash balances. The Chair added that with uncertainty in the sectors the Fund needed to be prudent and maintain appropriate cash balances.

Resolved:

1.     That the global market and investment update paper prepared by the Fund’s adviser, Redington, included at appendix A to the report be noted.

2.     That the Quarterly Asset Allocation and Performance Reporting for the West Midlands Pension Fund be noted.

3.     That the Quarterly Asset Allocation and Performance Reporting for the West Midlands Integrated Transport Authority Pension Fund be noted

4.     That the updated information received in relation to the Fund’s investment costs transparency reporting be noted.