Agenda item

To consider the report and note the information.

A report was submitted by the Investment Manager, reporting on the performance of the Fund over the quarter in question. It was noted that the Fund had returned 5.6% over the quarter, outperforming the benchmark with the total assets increasing by £186 million to bring the value of the fund to over £3.5 billion for the first time; the growth, income and performance protection assets had performed well during the quarter.

It was reiterated that the Fund, over the year, had returned 10.7%, which was just behind the benchmark; there was no doubt that the benchmark set was challenging, but the performance of the Gwynedd Pension Fund had historically been higher than the British funds' average.

The performance of equity investment managers was highlighted, explaining that the underperformance of the Sustainable Active Equity Fund was evident because stocks within the equity markets had been able to take advantage of artificial intelligence, namely the Magnificent 7, e.g. Apple, Microsoft and Tesla, which had performed well. The effect of this was underperformance within other stocks, e.g. long-term stocks within the portfolio that looked at energy transition. It was reiterated that Russell Investments intended to look at the Fund’s split and introduce a new investment manager to the portfolio to try to restore performance.

It was explained that fixed income managers had been through a difficult time with the impact of Russia's invasion of Ukraine, and the impact of inflation and interest rates. It was reiterated that as conditions stabilised, the performance was closer to the benchmark. Similarly, it was reported that property managers had seen the impact of Covid on the use of offices and high street units, but the property market had also now stabilised.

In the context of the WPP's private markets and Partners funds, it was noted that it was difficult to assess their performance because the investment was a longer term one and no concerns had been raised by Hymans Robertson.

With the triennial valuation showing a strong funding position, a review of the strategic asset allocation was implemented in consultation with Hymans Robertson and the Pensions Committee in November. As a result of the review, there would be an attempt to reduce risk to the Fund by reducing the growth assets (equity and investment in income assets and gilts) and introducing an allocation to natural capital to contribute to improving the Fund's net zero target. It was reiterated that work was underway to move towards the new allocation.

Thanks were expressed for the report

In response to comments about the underperformance of property managers and the lessons learned (e.g. in performance, type, and location) so that others were unlikely to make the same investments, it was noted that the Fund in question was coming to an end, with the Gwynedd Pension Fund's property funds transferring to the WPP. By implementing this, there would be an opportunity for alternative investment options such as, for example, international property and impact property (e.g. investing in Housing Associations).

The information was accepted