Agenda item

Considered –

A report of the Investment Consultants, Aon, providing a high-level summary of NYPF’s investments and funding during the second quarter of 2024/25.

Kenneth Ettles and Nick Conway of Aon presented the report and drew attention to the following points:

Funding:

·       The funding level was 115% which was only 1% below the funding level at the 2022 valuation. Although asset returns had been below expectations, liability values had fallen as a result of higher forecast investment returns.

·       The surplus had decreased by £52m.

·       High interest rates remained an issue, however towards the end of the quarter inflation fell to close to the Bank of England’s 2% target.

·       The low risk funding position was high compared to history and would be considered as part of the next investment strategy review.

·       It was noted that the funding position remained stable compared to most other LGPSs.

Asset allocation:

·       Asset returns were lower than expected and had decreased by 0.3% per annum since the 2022 valuation.

·       Forecast asset returns had increased from 6.1% to 7% per annum.

Market background and investment outlook:

·       The economic challenges across the world, and the potential for a recession in the US.

Fund performance:

·       The Total Fund performance snapshot was provided on page 19 of the report which highlighted that the Fund performed below the benchmark over the quarter.

·       The Total Fund performance was ahead of the composite benchmark over the 5 year period, however over the last 3 years, the Fund had underperformed. The Independent Investment Advisor commented that a 5 year figure was a better indicator of progress, as it captured performance over the full period of the pandemic, which the 3 year figures did not.

·       In terms of manager performance in the quarter, BCPP global equity was the biggest negative, alongside BCPP listed alts and BCPP multi asset credit. 

·       Baillie Gifford LTGG had performed well.  The manager had taken some profits from well performing stocks.

·       One Member commented that it would be helpful to include information on weighted performance attribution in order to see manager performance impact at a total Fund level.

·       It was noted that the property portfolio continued to struggle, and one Member asked for some further detail about property fund managers. Kenneth Ettles explained that a combination of the pandemic accelerating a move away from office working to online shopping had contributed to negative returns over the last few years but that the returns had now started to stabilise. The Head of Investments also explained that property was an asset class that took time to perform and explained that BCPP were launching a UK property fund which would be considered as part of the investment strategy review. 

·       Members commented that the decision of the Fund to exit investment from Hermes was a good decision. One Member queried whether the PFC could be kept informed of urgent matters on occasions where there was not a scheduled PFC meeting. It was confirmed that the Chair and the Treasurer would usually be called on to make such decisions, although additional committee meetings could be convened if required.

Resolved –

That the contents of the report from Aon are noted.