Agenda item

To consider the report and note the information.

A report was submitted by the Investment Manager updating the Board of the quarterly (and yearly) monitoring work being undertaken by the Investment Panel on the performance of the Pension Fund's investments. It was reported that the value of the market had slightly decreased, and the Fund had stabilised at £2.7 billion by the end of the financial year.

It was noted that the Fund's performance over the year was -1.5% within a challenging year with the impact of the War in Ukraine and high inflation, but it was highlighted that the three-month performance had started to improve, which continued in the first quarter of the new financial year. It was reiterated that a situation like this was common for local government pension schemes, and that the performance of the Gwynedd Pension Fund continued to be within the highest quartile of British funds.

Reference was made to the performance of the Equity Investment Managers, noting that despite the fact that the three-month performance had been positive, there was evidence of negative performances over the year and that was obvious because of the Emerging Markets' performance, as China's markets were slower than expected when re-opening following the Covid-19 restrictions. In the context of fixed income managers, it was noted that they had also had a difficult period with interest rates instability and inflation worldwide.

Whilst discussing Property Managers, it was highlighted that the sector had faced a challenging period with the instability of long-term use of office buildings and high street shops. In response, it was reported that the funds that the Fund invested in tended to diversify to buildings such as Amazon warehouses and out-of-town shops, in an attempt to manage the change for the benefit of the fund. In the context of Group Partners (that were responsible for managing private equity and the Fund's infrastructure investments), it was noted that it was hard to measure their performance within a specific period because of the time lag and therefore, the true performance was not measured until the fund was finally closed. Despite that, it was reiterated that the Partners had been performing well and that Hymans had not caused concern regarding their figures.

It was noted that the Fund's performance had been regularly assessed, even though long-term investment was the objective. It was highlighted that the three-year performance had been very standard and that the Fund had been in third place out of all the Local Government Pension Fund Schemes and was in a strong position. As a result, and following three-year valuation where, on 31 March 2022, the fund had been funded to 120%, advice was received from Hymans to decrease the fund's risk. This meant that there was an increase of 10% in the fund's equity with the money invested in private debt funds, infrastructure and worldwide credit through WPP. The intention was to implement this change over the next 12 months, although recently information was received that the Fund's funding levels had further increased to 160% and therefore discussions would need to take place with Hymans to further review the equity levels.

Gratitude was expressed for the report and members were congratulated on the three-year performance result with the fund in third place (out of 100) - this news was very encouraging.

In response to an observation of the intention to invest in property that was not on the high street, it was noted that the 'traditional' situation had changed since the Covid-19 period and that investment managers now looked at the 'type' of property to invest in (e.g., houses instead of shops). It was added that WPP saw a good opportunity to fully review the property portfolio, considering the opportunities in Wales or international property.

RESOLVED to accept and note the information.