Agenda item

Competition and Markets Authority - Investment Consultant Objectives

Report of the Director of Finance

Minutes:

Panel members were reminded that, at its meeting on 3 December 2019, they received a briefing paper from Hymans Robertson LLP (Hymans) advising of the findings of the December 2018 report of the Competition and Markets Authority (CMA), and their subsequent Order, in respect of the need for Pension Scheme Trustees to set annual objectives for their investment consultants. In response to the Order, the Pensions Panel continued to agree a high-level set of objectives with Hymans for each financial year, which incorporated more focussed objectives and detail on how the objectives were to be measured. The 2023/24 objectives were signed off by the Panel at the meeting in June 2023, where it was agreed that the Panel would assess, measure and report on the performance of the Investment Consultant against the objectives set, by way of a collective annual review.

 

Appendix 1 to the report had been annotated with comments, which reflected the Director of Finance’s view as to whether the desired outcome of the 2023/24 objectives had been achieved in the short term. In the opinion of the Director of Finance, the objectives and outcomes had been considered to have been met in all cases. The Panel were asked to consider and concur with this view.

 

The Panel was also requested to confirm its assessment of the outstanding objective, ‘Pensions Committee and Panel are satisfied with the quality, presentation and content of any training requested’ at the meeting. The Panel were in agreement that the level of service and training provided was of a satisfactory level.

 

It was explained to the Panel that, to reflect the long-term nature of the Fund’s Investment Strategy, most of the objectives for 2024/25 continued to be set at a high level. Whilst the focus of the objectives would be linked to the workplan for the year ahead, it would be the outcomes and the examples provided to demonstrate how the objectives had been achieved, which would be considered most important. The focussed objectives for the 2024/25 Financial Year were detailed in Appendix 2 to the report.

 

Very minor changes were proposed to the objectives for 2024/25, which reflected the fact that the workplan for 2024/25 would begin to focus on a review of the Fund’s Strategic Asset Allocation, as part of the planning for the 2025 Actuarial Valuation and, in conjunction with this, a review of the Fund’s Climate Change Strategy and target metrics, which were last approved in 2021/22.

 

It was highlighted that, as more of the Fund’s assets were being invested with LGPS Central Limited there was a need to consider the effectiveness of the oversight and monitoring arrangements in place to ensure that operational and performance standards were being met and a range of suitable and investable products continued to be offered.

 

It was also noted that the October 2023 response to DLUHC’s Local Government Pension Scheme consultation on investment pooling also mentioned CMA Objective Setting for Independent Advisers. It stated that ‘LGPS regulations will be amended to require objective setting for all advisers including consultants, pools and independent advisers when providing advice on investments, investment strategy statements, strategic asset allocation and manager selection’. It was explained that Officers will work with both Independent Advisers to agree a set of objectives relevant to their role, for approval by the Pensions Panel in due course.

 

Resolved: a. That the Pensions Panel’s concurrence with the view of the Director of Finance; that the desired outcomes from the Investment Consultant Objectives for 2023/24 have been met, where these can be considered in the short term, be noted.

 

b. That the Pensions Panel’s assessment of the objective ‘Pensions Committee and Panel are satisfied with the quality, presentation and content of any training requested’, be confirmed.

 

c. That the Investment Consultant Objectives, provided in Appendix 2 to the report, be approved, and the specific focus for the 2024/25 financial year, be noted.

 

d. That the intention to agree appropriate objectives with the two Independent Investment Advisers in due course, be noted.

 

Supporting documents: