Investments Paul Tysoe Investments Why Investments Investment Governance

Investments Paul Tysoe

Investments • Why Investments? • Investment Governance and Performance. • Collaboration.

Why are Investment Needed? • Pensions are not just for Xmas • Investment life cycle • Join age 18 retire age 67 + • Hold your money until you retire • And beyond • Draw pension over many years

Age profile of deceased pensioners

Income Sources CONTRIBUTIONS BENEFITS INVESTMENT RETURNS REDUCES DEMAND ON CONTRIBUTIONS

Funding Level and Deficit • • • Triennial Valuation Scheme Actuary – Hymans Robertson Revalue's liabilities Revises deficit Rates and Adjustments Certificate • The results of the latest valuation as at 31 March 2013 were agreed in March 2014 and showed: Assets Liabilities for past service Deficit Funding level • • £ 1, 547 m £ 2, 191 m £ 644 m 70. 5% Asset Allocation Strategy Risk and Return appropriateness

Funding Level and Deficit 2013 valuation Improving asset values The funding level for the whole fund not for individual employers.

% Return Performance of Fund Assets versus Target From 31 March 2013 to 30 June 2015

Governance Matrix Investment Sub Committee Annual manager review Cost monitoring Performance reporting Custodian Investment Managers Fx execution

Fund Structure at 30 June 2015 Market value of investments at 30 June 2015, £ 1, 798 m Equities, £ 1, 179. 5 m, 66% Private Equity, £ 1. 4 m , 0% Bonds - fixed income, £ 170. 0 m, 9% Property, £ 149. 9 m, 8% Bond - indexlinked, £ 156. 0 m, Diversified Growth 9% Fund, £ 141. 2 m, 8%

Investment Manager Structure at 30 June 2015 Market value of investments at 30 - June 2015, £ 1, 798 m Baillie Gifford Majedie - UK Equity, £ 228 m, 13% Newton - Global Equity, £ 288 m, 16% UBS - Indexlinked bonds, £ 156 m, 9% Wellington Bonds, £ 170 m, 9% Diversified Growth Fund, £ 141 m, 8% CBRE - Property, £ 147 m, 8% Skagen - Global Equity, £ 84 m, 5% UBS - UK and Global equities, £ 582 m, 32%

Total return by Fund Manager – 3 years to 31 March 2015 Return over 3 years Capital Gain/Loss (£m) Income (£m) Total Return (£m) Passive Equities 103. 8 22. 3 126. 1 Global Growth 98. 5 15. 9 114. 4 Global Value 16. 1 4. 1 20. 2 UK Specialist 74. 4 20. 6 95. 0 UK Value 54. 9 21. 9 76. 8 Diversified Growth Fund 19. 6 0. 0 19. 6 Property 14. 0 12. 6 26. 6 Core Bonds [UK] 26. 5 1. 4 27. 8 Global Strategic Credit 2. 6 9. 9 12. 5 Global Total Return 5. 7 0. 0 5. 7 46. 1 108. 7 524. 7 Manager Total Investment returns adding real value

Investment Pooling Collaboration • Administering Authorities must “pool investments to significantly reduce costs, while maintaining investment performance” • Funds to come forward with their own proposals to meet common criteria: (size, cost savings, governance, Infrastructure reference? )

“Regional” Working Group (ACCESS) • A Collection of Central Eastern and Southern Shires • Like Mindedness – Core Principles • “To seek the best outcomes for our Funds and the wider LGPS individually and collectively” • LGSS Officers fully participative on project work streams • Informed approach – careful transition planning

Traditional regions: Combined LGPS Assets North West £ 31, 233, 345 North East £ 33, 376, 148 Midlands £ 35, 134, 218 Wales £ 11, 825, 847 London £ 25, 621, 998 South West £ 17, 087, 535 South East £ 37, 816, 063

Mandates by Asset Class [14 Funds] 70 60 197 mandates Combined Asset Values £ 33. 2 bn Average 14 per Fund 59 50 40 33 30 20 26 19 18 13 15 8 10 6 0 Active Equities - Passive Equities Fixed Income UK non UK - non UK Active Index Linked Gilts Property Other Alternatives Cash and Other ?

Asset Class Value (£m) Other Alternatives, £ 4, 713 m Cash and Other, £ 710 m Active Equities - UK , £ 3, 919 m Active Equities - non UK, £ 8, 568 m Property, £ 2, 957 m Index Linked Gilts, £ 1, 600 m Passive Equities - UK, £ 2, 389 m Fixed Income - Active, £ 4, 031 m Passive Equities - non UK, £ 4, 320 m

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