Agenda item

To receive an update on the Wales Pensions Partnership

The Investment Manager submitted a report, providing a formal update to members on the developments of the Wales Pension Partnership (WPP). It was reported that collaboration continued to go from strength to strength on matters such as freedom of information requests, voting and engagement and generally sharing  good practice across the funds. It was noted that 83% of Gwynedd's Fund had now been pooled with the WPP.

Attention was drawn to the equity funds referring to the performance of the Global Growth Fund, which had three underlying managers operating a very different style to each other – Baillie Gifford, Pzena and Veritas. Members were reminded that this fund, in the early years, had performed very well, and this was mainly due to the performance of Baillie Gifford. It was highlighted that Baillie Gifford was now underperforming and mainly due to the nature of its investments and that its performance was 'cyclical' (sometimes good, and not as good at other times). It was reiterated that recent discussions had been held with Baillie Gifford and, despite the challenging period, they were confident in the companies in which they invested.

In the context of the Global Opportunity Fund, it was reported that the fund included eight underlying managers and, although all managers would not perform well at the same time, the diversified approach meant a stable position and the fund performed ahead of the benchmark on a regular basis.

In the context of Fixed Income Funds, reference was made to the Multi-asset Credit Fund, which had five different investment managers. It was reported that the fund had underperformed, which had been driven in large part by instability in the market with the war in Ukraine, Covid restrictions in China and the impact of rapid inflation increases. Despite concerns that the fund was facing a challenging period, it was added that this was a long-term investment commitment and, therefore, the aim was to continue with the investments in the hope of experiencing progress at the end of the instability.

When discussing the Absolute Return Bond Fund, which had four investment managers, it was highlighted that conditions in this field had also been challenging with the impact of inflation and interest rates, but again, it was a long-term investment and there was willingness to continue with the investments in the hope of experiencing progress.

It was reported that the Emerging Markets Fund, launched in October 2021, had six underlying investment managers including Bin Yuan, a China specialist. It was noted that conditions were again very challenging and that Bin Yuan had caused the element of underperformance due to China’s ‘zero Covid’ policy. It was reiterated that it was hoped to see an improvement in market conditions and good returns.

Reference was made to upcoming developments by the WPP noting the work being undertaken in the field of private markets with companies appointed to run the private debt and infrastructure mandates. It was added that background work was being carried out to establish the companies in the hope of investing in them in 2023/24. The Gwynedd Fund intended to let the infrastructure and private equity investments mature naturally and to invest gradually with the pool. It was noted that initial discussions had also commenced in relation to the property asset class.

In the context of Sustainable Equity Fund, namely a fund created by Russell Investments after assessing the pool's responsible investment needs, it was highlighted that it was intended for this fund to go live in Quarter 1, 2023 with features of the fund ensuring that this was a step in the right direction in responsible investment. It was added that the Gwynedd Fund would move part of its equity investments to this Fund but details were to be confirmed.

Members were referred to the WPP website where a number of useful documents were available. The substantial fees involved with running the pool were also highlighted and it was explained that these fees were divided equally between members of the partnership – the fees included consultant fees, solicitors, translation work and voting and engagement provider work.

Gratitude was expressed for the report and to all staff associated with the work

In response to a question regarding fees, it was noted that administrative costs were divided equally between the eight funds that were part of the partnership, but that investment costs were split according to the individual investment size of each fund.

The information was accepted.