EXCLUSIVE: Leaked minutes of Merseyside Pension Fund’s Investment Monitoring Working Party
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The public meeting of Wirral Council’s Pensions Committee held on the 16th November 2015
I will start this piece by declaring that I have a close family relative paid a pension by the Merseyside Pension Fund.
Monday night’s public meeting of Wirral Council’s Pensions Committee (you can view the video above) chucked out the public for two agenda items (issues about the tender exercise for CB Richard Ellis Capital Advisers Ltd (CBRE) and the minutes of the Investment Monitoring Working Party meeting of the 17th September 2015 and the 8th October 2015.
Originally one of the governance policies agreed by councillors that run the Merseyside Pension Fund stated that minutes of the Investment Monitoring Working Party and Governance Working Party should be published. I did query a while back why they weren’t, which led to the situation now where the minutes are split on the agenda and the public gets to see which councillors turned up, who sent their apologies and what the declarations of interest are.
However the rest of the minutes of those meetings (despite it being councillors that sit on these committees), councillors decide to keep the rest of the minutes a secret (on the advice of Wirral Council officers).
As it states on Wirral Council’s website the law states “Information is exempt to the extent that, in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information” and the reason given on Monday evening was “Information relating to the financial or business affairs of any particular person (including the authority holding that information)”.
Strictly speaking politicians are supposed to carry out their own public interest test based on the above and I suppose I should kick up more of a fuss at this point of the meeting if they’re about to chuck us out for no reason.
The Merseyside Pension Fund is a large pension fund with billions of pounds invested. Of course as a member of the press I’m going to take a view that it’s wrong for the public sector to be engaging in these inappropriate levels of secrecy when the total number of people in the fund comes to over 100,000.
Actually persuading politicians to actually go against an officer recommendation on this though is probably beyond my powers of persuasion. So here is a leak instead of the Investment Monitoring Working Party minutes of 8th October 2015. Think of all the money I’ve saved Wirral Council by not making a FOI request for this (although no doubt they will now carry out another leak investigation!)
I’ve corrected Cllr Ann McLachlan’s name in section 1 which was misspelt as McLachalan.
NOT FOR PUBLICATION
By virtue of paragraph(s) 3 of Part 1 of Schedule 12A
of the Local Government Act 1972.
EXEMPT APPENDIX 2
Minutes of the Investment Monitoring Working Party,
8 October 2015
|Councillor Ann McLachlan (WBC) (Vice Chair)
|Peter Wallach (Head of MPF)
|Councillor Geoffrey Watt (WBC)
|Joe Blott (Strategic Director Transformation and Resources
|Councillor Treena Johnson (WBC)
|Noel Mills (Independent Adviser)
|Rohan Worrall (Independent Adviser)
|Councillor Paulette Lapin (SC)
|Louise-Paul Hill (Aon Hewitt)
|Emma Jones (PA to Head of Pension Fund)
Apologies were received from:
|Councillor Paul Doughty (WBC)
|Councillor Brian Kenny (WBC)
|Councillor Cherry Povall (WBC)
|Councillor George Davies (WBC)
|Councillor John Fulham (SHC)
|Councillor Adrian Jones (WBC)
Declarations of Interest
Councillor Geoffrey Watt declared an interest due to a relation being a beneficiary of the Merseyside Pension Fund.
Cllr Ann McLachlan (AM) chaired the meeting on behalf of Cllr Paul Doughty.
2. External Manager Presentation
2.1 M&G Investments
Matthew Vaight (MV), Fund Manager and Orla Haughey (OH), Client Director, presented their global Emerging Markets Mandate to IMWP. Their agenda covered their mandate, market overview, a re-cap on their process, performance and finally their funding positioning.
Merseyside Pension Fund current holdings are valued at £112.8m. They briefed members on their bottom-up stock picking style and currently hold 50-70 stocks on behalf of the Fund.
A discussion ensued with regard to the risk in developed markets compared to emerging markets but MV argued that although a portfolio could remain cautious there are improving fundamentals in countries such as Taiwan for example which still offer opportunities as markets on cheaper valuations.
Specific risks of stocks and value was examined and how specific risks can be stock specific rather than country specific. However the sharp currency devaluations in some markets such as Brazil and Russia over the past 12 months had hit the fund’s performance where stock fundamentals had been overridden by the market’s performance. Oil prices were discussed and how this affected the markets. To further mitigate risks M&G said they have also developed a framework to look at currency which will further aid stock selection.
Questions were raised with regard to governance and M&G clarified how they work with particular companies and examine management within the organisation closely.
Ethical investments were discussed and M&G clarified they have no exposure in tobacco products or defence. M&G explained their view is that good corporate governance is an indication of quality management and is a good indicator of how a company is run. It combined to make an attractive investment and is integral to their analysis of a company.
3. External Manager Presentation part 2
3.1 Maple-Brown Abbott
Geoff Bazzan (GB), Head of Asia Pacific Equities, and Susan Douse (SD), European Marketing and Client Services, presented at IMWP an overview of their organisation. They spoke about their value style and investment process and philosophy. They looked at their total performance up to 31 August 2015 and the major contributors and detractors during that period.
A discussion ensued with regard to their cyclical turn down and the classic value trap over the long term. The Chinese economy was discussed and the fact that GB believes there is still opportunities in China but be wary of companies exposed to too much US debt.
Maple-Brown Abbott’s asset allocation and in particular their specific stock selection was debated and how this has impacted on performance. GB asserted that there has been a slight improvement in performance and hopes to see this improving in the future. GB expressed the view that exposure of Chinese stocks will improve.
Maple-Brown Abbott were asked about their ethical investments and it was asserted that restrictions are imposed on companies but in the broader portfolio they do not screen out but look at the sustainability over the long term and subsequently ethical questions come into play.
External Manager Presentation part 3
Mickaël Tricot (MT), Head of Emerging Markets Equities and Peter Brackets (PB) presented the Amundi Actions Emergent Team, Process and Portfolio Review to the IMWP. MT gave Merseyside’s portfolio’s investment summary and talked about the team structure and its resources. MT explained that they combined a top-down and bottom-up featured approach which supported a high quality stock selection process which was well suited for emerging markets with higher volatility.
Ethical investments were discussed and MT asserted this was very subjective but they coupled this with knowing the companies and looking carefully at aspects of the organisation thoroughly. MT explained that although aspects of ethical investments were not mandatory, companies were coming under pressure from the stock exchange to comply with guidelines. This was becoming very important and companies are finding it beneficial to conform.
The question of how the stock exchange can apply pressure was discussed and it was stressed that there was a common current exchange of disclosure and reporting which raises issues when concerns are expressed. It was also argued that collaboration and initiatives within global firms have a consistent framework which can put pressure on managers to comply. There are also the UN PRI principles which encourage disclosure.
Amundi’s exposure in Brazil and currencies was discussed and value versus growth was debated further. Amundi noted they were always looking at changing their approach to look at more complex valuations by using supplementary tools and databases to help with analysis.
5.1 Noting items
5.2 Action Points
5.3 Summary of Recommendations
5.4 Discussion Points (including any other business)
Date of Next Meeting
Thursday 10 December 2015 at 10.00 am, 6th floor, Cunard Building.
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