Agenda and draft minutes

To receive any apologies for absence.

No apologies for abscense were received.

To confirm the minutes of the meeting held on 05 March 2024.

The minutes of the meeting held on 5 March 2024 were confirmed and signed.

To disclose any pecuniary, other registrable or personal interest as set out in the adopted Code of Conduct.  In making their decision councillors are asked to state the agenda item, the nature of the interest and any action they propose to take as part of their declaration.

If required, further advice should be sought from the Monitoring Officer in advance of the meeting.

No declarations of disclosable pecuniary interests were made at the meeting.

Representatives of town or parish councils and members of the public who live, work, or represent an organisation within the Dorset Council area are welcome to submit either 1 question or 1 statement for each meeting.  You are welcome to attend the meeting in person or via MS Teams to read out your question and to receive the response.   If you submit a statement for the committee this will be circulated to all members of the committee in advance of the meeting as a supplement to the agenda and appended to the minutes for the formal record but will not be read out at the meeting. The first 8 questions and the first 8 statements received from members of the public or organisations for each meeting will be accepted on a first come first served basis in accordance with the deadline set out below.  Further information read Public Participation - Dorset Council

All submissions must be emailed in full to Joshua.kennedy@dorsetcouncil.gov.uk by 08:00am on Thursday 21 March 2024.

When submitting your question(s) and/or statement(s) please note that:

·       You can submit 1 question or 1 statement.

·       A question may include a short pre-amble to set the context.

·       It must be a single question and any sub-divided questions will not be permitted.

·       Each question will consist of no more than 450 words, and you will be given up to 3 minutes to present your question.

·       When submitting a question please indicate who the question is for (e.g., the name of the committee or Portfolio Holder). 

·       Include your name, address, and contact details.  Only your name will be published but we may need your other details to contact you about your question or statement in advance of the meeting.

·       Questions and statements received in line with the council’s rules for public participation will be published as a supplement to the agenda. 

·       All questions, statements and responses will be published in full within the minutes of the meeting.   

No questions or statements from members of the public were made at the meeting.

To receive questions submitted by councillors.

Councillors can submit up to two valid questions at each meeting and sub divided questions count towards this total. Questions and statements received will be published as a supplement to the agenda and all questions, statements and responses will be published in full within the minutes of the meeting.

The submissions must be emailed in full to Joshua.kennedy@dorsetcouncil.gov.uk by 08:00am on Thursday 21 March 2024.

Dorset Council Constitution – Procedure Rule 13

No questions or statements from Councillors were made at the meeting.

To consider any items of business which the Chairman has had prior notification and considers to be urgent pursuant to section 100B (4) b) of the Local Government Act 1972. The reason for the urgency shall be recorded in the minutes.

There were no urgent items.

To consider the quarterly report on pension fund administration.

Performance against Key Performance Indicators (KPIs) continued to be generally good despite difficulties with the McCloud remedy.

The new McCloud regulations came into place on 1 October 2023. There had been further delay in the software delivery needed for the implementation of the McCloud remedy and this was now not expected until the end of the year. The pension fund’s data was in good condition ready for the McCloud remedial work and the 2025 valuation. Local Government Pension Scheme (LGPS) funds are expected to issue annual benefit illustrations in compliance with the new McCloud regulations for the first time next year. This would not be possible until the software had been delivered.

The possibility of moving to a different software provider was discussed and it was noted that the other main software provider was further ahead in implementing the McCloud remedial work compared to the Dorset’s provider. Discussions had taken place between officers and the provider, and the provider was due to attend the next Local Pension Board meeting where software delivery progress would be monitored.

New Government Actuary Department (GAD) guidance was issued on 24 January 2024. This covered technical areas such as interfund transfers and provided details of additional calculations required in respect of the McCloud remedy.

To consider the quarterly report on the value and performance of the pension fund’s investments.

The value of the pension fund’s assets at 31 December 2023 was £3.8 billion with just under 80% of assets by value now under the management of Brunel.

Employer contribution rates would be reviewed by the actuary at the next triennial valuation based on assets and estimated liabilities as at 31 March 2025. The actuary was expected to take a cautious approach if the funding position had improved as they would not want to reduce rates and then subsequently have to increase rates at a later date.

The total return from the pension fund’s investments over the quarter to 31 December 2023 was 5.0%, compared to the combined benchmark return of 4.5%.  The total return for the 12 months to 31 December 2023 was 9.7% compared to the benchmark return of 8.8%.  Annualised returns for three years were 4.5% compared to the benchmark return of 6.0% and for five years were 5.8% compared to the benchmark of 6.4%.

The quarter to 31 December 2023 saw global falls in inflation at a faster pace than previously expected, which lead to expectations that interest rates might start to fall faster than expected and in turn a rally across most asset classes.  This had continued into the first quarter of 2024.  The backdrop for Brunel’s portfolios was more positive due to stabilising interest rates and lower energy prices.

A key theme in markets was the performance of the so-called Magnificent Seven mega-cap stocks - Apple, Amazon, Alphabet, Meta, Nvidia, Microsoft and Tesla. The potential for social media and anti-trust legislation could have impact on the valuations of some of these companies.  Brunel’s active portfolios were generally underweight these companies and their underlying managers would be aware of and managing these risks.

Brunel were investigating with FTSE the reported increase for the quarter in Weighted Average Carbon Intensity (WACI) for the Paris Aligned Benchmark (PAB) and Climate Transition Benchmark (CTB) passive equities products.  The results of the investigation would be shared with client funds but it was believed that these products were meeting their targets.

David Vickers, Brunel’s Chief Investment Officer, had accepted an invitation to sit on a Green Finance Initiative (GFI) taskforce to deliver independent recommendations to the Shadow Chancellor regarding mechanisms to encourage greater private investment in the UK’s net zero economy.  Brunel is not party-political and engages with the UK government and shadow government, and with other mainstream political parties, on an independent basis where it considers such engagement useful.

Brunel agreed to provide a more detailed analysis of the geographical exposure of its Emerging Markets equities portfolio.

To receive a verbal update from Cllr John Beesley in his capacity as the Committee’s representative on the Brunel Oversight Board and as a member of the Scheme Advisory Board (SAB) for the Local Government Pension Scheme (LGPS).

Cllr John Beesley, the pension fund’s representative on the Brunel Oversight Board (BOB), and also a member of the LGPS Scheme Advisory Board (SAB), updated the Committee on governance matters relating to investment pooling. 

Brunel’s budget for 2024/25 had been agreed by the shareholders.  It had also been agreed by the ten shareholders that the threshold for approval of Special Reserved Matters (SRM) would be reduced from 100% to 75% therefore ensuring that one fund could not exercise a veto over the wishes of the majority of shareholders.  A replacement for Brunel’s retiring chair had been agreed subject to confirmation.  It was agreed that Brunel’s Chief Investment Officer should be invited to a forthcoming meeting of the Committee.

SAB wanted to ensure that any legislation or guidance resulting from the proposals for the LGPS in the spring budget was compatible with fiduciary duty.  The McCloud remedy was still occupying a lot of the SAB’s time.

To approve the pension fund’s Treasury Management Strategy for 2024/25.

The Committee considered a report by officers setting out the Treasury Management Strategy (TMS) for 2024-25.

Although the pension fund had no strategic allocation to cash, cashflows needed to be managed to ensure there was sufficient liquidity to meet liabilities as they fell due and to invest any surplus balances appropriately.  The TMS provided the framework within which officers must manage these cashflows and cash investments.

The TMS for 2024-25 was unchanged from 2023-24 and broadly followed the TMS for Dorset Council, the administering authority for the pension fund, where applicable.

Decision

That the Treasury Management Strategy for 2024-25 be approved.

To confirm the dates for the meetings of the Committee in 2024/25:

26 March 2024

1.30 pm Tuesday 25 June 2024 - County Hall, Dorchester.

1.30 pm Tuesday 17 September 2024 - County Hall, Dorchester.

1.30 pm Tuesday 26 November 2024 - County Hall, Dorchester.

1.30 pm Tuesday 18 March 2025 - County Hall, Dorchester.

All meetings to be preceded by training for committee members 10am to 12.45pm

1.30 pm Tuesday 25 June 2024 - County Hall, Dorchester.

1.30 pm Tuesday 17 September 2024 - County Hall, Dorchester.

1.30 pm Tuesday 26 November 2024 - County Hall, Dorchester.

1.30 pm Tuesday 18 March 2025 - County Hall, Dorchester.

All meetings to be preceded by training for committee members 10am to 12.45pm.

To move the exclusion of the press and the public for the following item in view of the likely disclosure of exempt information within the meaning of paragraph 3 of schedule 12 A to the Local Government Act 1972 (as amended).

The public and the press will be asked to leave the meeting whilst the item of business is considered.

Decision

That the press and the public be excluded for the following item(s) in view of the likely disclosure of exempt information within the meaning of paragraph 3 of schedule 12 A to the Local Government Act 1972 (as amended).

To receive an update on any changes to investment management arrangements. 

The Committee were updated on progress made implementing changes to investment management arrangements agreed previously by the Committee.

At its meeting 29 November 2023, the Committee approved the transition of the pension fund’s holdings in the RLPPC Over 5 Year Corporate Bond Fund managed by Royal London Asset Management (RLAM) to the Sterling Corporate Bonds portfolio managed by Brunel Pension Partnership.  This transition was approximately 95% complete and expected to be fully complete within weeks.

At its meeting 5 March 2024, the Committee approved the transfer of the pension fund’s holdings in Climate Transition Benchmark (CTB) passive equities to Paris Aligned Benchmark (PAB) passive equities.  This transition was now fully complete.