Agenda item

To consider and note the information.

The Investment Manager submitted a report, providing a formal update to members on the work of the Wales Pension Partnership (WPP). It was noted that the report was now a regular report submitted to the Board and was a very important element of the Gwynedd Pension Fund where 85% of the fund had now been pooled.

It was reported that the Head of Finance and the Investment Manager represented the Fund in all the pool's meetings, and that the joint-working continued to work well on matters such as responding to freedom of information requests, voting and engagement and generally sharing good practice across the funds.

Attention was drawn to the funds, highlighting that the performance of the funds had been generally lower than the benchmark since the beginning, due specifically to the fact that the benchmark was challenging e.g. for the Sustainable Equity Fund the benchmark was the MSCI All Country World Index, which included all the companies, although the companies in which the Fund was able to invest were restricted. It was explained that the Global Growth Fund had been in existence for over five years and had under-performed the benchmark. As a result, Russell Investments had changed the structure of this fund and had changed the managers within the portfolio – Gwynedd's officers, the Fund advisers, Hymans Robertson and WPP officers would closely monitor the funds in future. 

It was reported that new private market funds were in the process of being established, with an update to be shared when the performance of these funds had been received. Similarly, it was noted that the Partnership was setting up property funds and a discussion would be held with Hymans Robertson to discuss which option could be taken up.

Reference was made to the 'Fit for the Future' consultation launched by the UK Government which covered three key areas:

·        Reform of the Local Government Pension Scheme asset pooling arrangements

·        Boosting local investments

·        Strengthening governance within the pension funds.

It was highlighted that a response to the consultation had been submitted by the Gwynedd Pension Fund along with a business case which suggested that the way forward for WPP was for Wales to retain an independent LGPS fund building on the success of existing pooling arrangements. It was explained that this could be done by creating an investment company under the name 'IM Co'; the second option would be as a sub-partner or client in a pool under the management of larger funds, along with transitional costs. It was noted that if the Gwynedd Pension Fund wanted to continue to have a say in decisions, to shape investments to suit their profile and ensure investment in Wales, WPP would have to be developed into IM Co and while this would involve implementation costs, the situation had been forced upon us. It was hoped that the returns would remain strong and that ultimately the investment costs would decrease.

It was reported that Sioned Parry and Osian Richards had attended the meeting of the Chairs of the Pension Board for Wales on 1 April 2025. Reference was made to the comments conveyed at the meeting in favour of keeping WPP independent, and that officials were working extremely hard within a tight timeframe to respond to the demands of the review.

Thanks were given for the report

Observations arising from the ensuing discussion:

·        Despite the costs, the initiative would be beneficial to Wales

·        The effort to retain the independence of the Wales pool was welcomed

·        There was a need to ensure that the process was commensurate to the need rather than an unwieldy, costly process to create change for the sake of change

·        The original aim was to pool funds to save costs, but there was now a compulsion to spend to establish a company

·        The UK Government had not acknowledged that the current arrangements were effective and acceptable, and yet were imposing the establishment of a company to be approved by the Financial Conduct Authority (FCA)

·        A request for officers to share information about the forums that submitted observations during the consultation

In response to a question about the potential for long-term savings (although there was no reference to savings in the Business Plan) it was noted that in terms of very broad objectives, the costs of Investment Managers would be performance-dependent and therefore in the long term it was hoped that there would be a saving for Gwynedd (although there was no certainty at present). In response to a comment regarding the impact on staff resources and costs, it was noted that information regarding staff responsibilities had not been received. It was accepted that there was frustration that there were no formal costs to share, but any information received would be shared with Board members.

The information was accepted.