Agenda item

To note the progress report and approve the Investment Consultants’ objectives for the upcoming year.

DECISION

·         To accept and note the progress report

·         To approve the objectives of the Investment Consultants for the next period subject to adding the word 'certain' to objective 7 'Provide relevant and timely advice'.

'....'alternative' advice could sometimes be more proactive, certain and timelier...'

Submitted - the report of the Investment Manager, reporting on progress against current objectives and requesting that the Committee review and approve the objectives for 2023. It was reported, following a review of the of the investment consulting and fiduciary management markets, the Competition and Markets Authority had noted that Pension Scheme Trustees should set objectives for their investment consultants, and clearly stipulate the expectations upon them.

It was reported that Hymans was delivering good work, providing quarterly reports for the investment panel (including a responsible investment rating for every manager), comprehensive reports for the investment panels, offering practical advice and performing in accordance with the objectives. It was explained that this last year had been busy with the consultants providing further advice on the investment strategy to restructure the Fund's strategic assets allocation following the valuation. It was reiterated that this had been important and detailed work and there had been good collaboration. It was also reported, now that responsible investment was a key area, that Hymans had worked with the Fund's officers on reviewing the responsible investment policy, advising on new investments and providing a response to the TCFD consultation.

Hymans did not provide training as part of its direct contract with the Gwynedd Fund, however appropriately timed training was available through the Wales Pension Partnership, with significant contributions from Hymans.

Accepting that the fees were high (which was also true for some other companies in the market), it was wised to receive an estimate of the cost of the work that was agreed to in advance.

Reference was made to the current objectives as well as the progress made against those objectives in 2022. It was highlighted that two new objectives had been added. There was no wish to change the Fund's investment advisors, however there was still a need to challenge their performance and ensure that the relationship was not too 'comfortable'. Due to the frustration of establishing currency hedging arrangements and as a result of missing out on opportunities to take advantage of the exchange rate with a possibility of adding value, it was considered that was a need for more proactive and timely advice and encouragement, to be able to respond to opportunities without frustration in the future,

The Chairman reiterated that the company provided a good service and met the objectives that were set by the Committee.

Gratitude was expressed for the report.

In response to a question regarding the need to expedite processes, e.g. currency hedging and the possible associated risks, it was noted there was frustration of not being able to act sooner and maybe in future the investment advisers could draw attention to potential opportunities. Nevertheless, the Fund Director highlighted that adopting the currency hedging procedure was a significant step for the Fund and the Committee's approval had been crucial in moving to that arrangement. It was reiterated that benchmarks for the future had now been established and agreements with BlackRock were ready to be implemented within a day should the opportunity arise.

In response to an additional question regarding the benefit of establishing an emergency response process, it was noted, in an emergency, the Principal Finance Officer and the Chair of the Pensions Committee would be able to implement this, but only in an emergency. Any major changes would need to be reported to the Committee and would require approval prior to implementation.

During the ensuing discussion, the following observations were made by Members:

·         That reviewing the strategic objectives often was good practice

·         Firmer guidance would be appreciated

·         Despite missing out on opportunities, there was now a process in place to act quicker

·         That the objectives set out challenges that would add value

·         Despite the good cooperation, there was a need to avoid being too comfortable

RESOLVED

·         To accept and note the progress report

·         To approve the objectives of the Investment Consultants for the next period as submitted in Appendix 1, subject to adding the word 'certain' to objective 7 'Provide relevant and timely advice' -

'.....'alternative' advice could sometimes be more proactive, certain and timely ...'