The Head of Investment Strategy presented the Quarterly Report to 30 September 2019.

For the quarter to the end of September, the Fund returned 2.8% against the expected benchmark which gave a year to date return of 6.2% against an expected return of 6.3%.  The Fund valuation rose from £8,694.4m to £8,913.8m.

Looking at the Fund ex-equity protection showed an outperformance of the benchmark giving a return of 3%.

Considering the equity protection strategy, the nominal value of the portfolio which was protected rose in value over the quarter by 3.1% and the value of the options detracted by £18.4m from the value of the Fund.  This effectively reduced the return to the Fund by 0.2%.

The indicative funding level at 30^th September 2019 was 103.1% compared to 101.5% at 30^th June 2019.

A Stone updated the Authority on Border to Coast’s latest progress and performance.

Members noted that Border to Coast had:

·       Launched its fifth equity fund

·       Launched three alternative assets funds

·       First bond fund designed and managers selected (Q1 2020 launch)

·       £14bn equities under management at end September 2019

·       Initial £1.75bn committed to alternatives

Members also noted the capability launch timetable up to 2022.

With regard to performance up to the end of December 2019:

·       UK Listed Equity had produced marginally positive performance over the period.

·       Overseas Developed Equity was 0.4% ahead of the benchmark

·       Emerging market equity was 1.1% ahead of the benchmark and produced its strongest quarter since inception.

A Stone updated Members on the development of a Multi-Asset Credit offering.  There had been interest from 10 Partner Funds involving around £2.5bn and Border to Coast were hoping to hit a target of benchmark + 3-4% per annum with the product.  There was still a lot of work to be done; it was hoped to launch the fund in approximately 12 months.

The Authority was updated on Index Linked Bonds and the alternative fund range which included Private Equity, Infrastructure and Private Credit.

Cllr Sangar thanked A Stone for his presentation which would feed into decisions the Authority would take in March in terms of the Investment Strategy.

What was important was the information on the capability launch timetable and what the Authority wanted to invest in.

Border to Coast had a busy 2019 and 2020 and 2021 would also be very busy by which stage they would have a full suite of sub-funds that they thought schemes may want to invest in.

The question for the Authority in March would be what wasn’t there.  SYPA would not be able to invest in agriculture, property was obviously difficult as it would not be available until 2022.  It was this information that Members needed, it was very difficult for Members to keep up to speed with everything.

Border to Coast was wholly owned by 12 Funds whose job it was make investments to pay pensions.  It was vital to ensure that Border to Coast was supplying the products that the Partner Funds required.  Discussion today and in March should be around where this was taking the Authority.

The Fund Director replied that Cllr Sangar had identified a session that would be included in the new Member induction in June.  One of the Authority’s advisors had experience of three different pools and therefore three different ways of doing things and would be able to share this knowledge.

To answer the fundamental question regarding what was missing, the only obvious asset class that was not there was Commodities and this was not the time to be investing in that asset class.  With regard to Agriculture, the Authority was still to decide what was to be done in that area.

It was the intention to hold an informal session on the Investment Strategy before the meeting in March to assist with Members’ understanding.

RESOLVED – That the Performance reports be noted.