Annual Report 2018-19
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Annual Report 2018-19 Published by: Cheshire Pension Fund Council Offices, 4 Civic Way, Ellesmere Port, CH65 0BE www.cheshirepensionfund.org Accessing Cheshire Pension Fund information and services Pension Fund information is also available in audio, braille, large print and other formats. If you would like a copy in a different format or another language please email us at: [email protected] Tel: 01244 976000 Contents 3 Introduction 4 Management and Financial Performance 6 Risk Management 14 Administration Report 26 Investment Policy and Performance 42 Governance Arrangements 71 Statement of Accounts 119 Pension Fund Accounts Reporting Requirement 121 Actuarial Statement 123 List of Employers Contributing into the Fund in 2018-19 133 Scheme Advisory Board Summary information 134 Funding Strategy Statement 160 Investment Strategy Statement 169 Responsible Investment Policy 172 Communications and Engagement Strategy 182 Contacts and Further Information 2 Cheshire Pension Fund Annual Report 2018/19 Introduction Welcome to the Annual Report of the Cheshire Pension Fund for the year ending 31st March 2019 The Fund’s investment agenda this year has once again, been implemented over the next twelve months, but overall the review dominated by pooling, following the successful launch of LGPS Central concluded that the current arrangements are effective and that there on 1st April 2018. During the year the Fund has worked with its LGPS was no case for fundamental change. This positive outcome is Central partners, and the jointly owned pool company (LGPS Central testament to the hard work and commitment of all concerned; Ltd) to develop a transition plan and timetable to transfer collective officers, committee and board members and the Fund’s investment assets of around £40 billion to a shared investment platform. and actuarial advisers. The scale and complexity of the exercise is proving as challenging as The 2018/19 Accounts set on pages 71-118 show that the Fund expected, but in February 2019, the Fund successfully completed an continues to be cash flow positive, after taking into account initial transfer of £250m from its active equity portfolio to LGPS Central’s Global Active Equities pooled sub-fund. investment income of £34m. A small underspend was delivered against the administration budget, which continues to grow in line Subsequently, the Pension Fund Committee also agreed to transfer with scheme membership and employer participation. £460m to LGPS Central’s low carbon passive index fund, and earmarked a further £125m for joint investment with LGPS Central The Benefits Team’s key improvement priority for the year was data partners, in a Sustainable Equity Fund; reflecting the Fund’s continuing quality, both in response to increased scrutiny from the Pensions commitment to long term, sustainable investment. Regulator and the need to improve processing efficiency and reduce The fundamental objective of pooling is to deliver reduced costs and persistent casework backlogs. The introduction of monthly employer improved value through scale economies, sharing of costs and online returns from February 2019 is the critical driver here, and the expertise and improved efficiency. In line with these objectives, and Fund’s Administration Strategy has been updated to reflect this. national guidance issued by CIPFA, this year’s Annual Report includes So far, the response from employers has been positive, with additional information relating to the costs and savings associated encouraging prospects for a successful roll-out programme over the with pooling, which will be updated annually as transition progresses. next twelve months. Economic uncertainty both in the UK and globally, caused significant The introduction of monthly returns is just one element of an market volatility during the year, but the Fund continued to perform ambitious change and transformation programme which the well with a total return for the year of 5.5% compared to a benchmark Pensions Team launched last year, and which is continuing with the return of 5.5%. The value of assets during the year rose from £5.3 support of a full time programme manager. Planned developments billion to £5.6 billion as a consequence. There were no significant in the next twelve months include the relaunch of the Fund’s website, changes to the Fund’s overall asset allocation or investment strategy . the introduction of a new client/employer relationship and There were also no changes to the membership of the Pension Fund engagement model, and the start of the journey towards member Committee during the year, although a number of long standing self-service. This is being underpinned by a systematic review of key members announced their intention to retire in the run up to the May business processes and investment in staff training and development. 2019 local council elections. They will take with them many years of Despite periods of economic volatility over the past year, funding level knowledge and experience which will be missed, but preparations are improvements achieved since the last valuation in 2016 have been in hand to welcome and induct new members of the Committee sustained. The funding position at 31st March 2019 was 91%, during the summer of 2019. compared to 90% at the end of 2016. This means that the Fund is The independent Chairman of the Local Pensions Board, along with well placed going into the 2019 valuation, and the actuary has already employee representatives and council nominated employer confirmed reductions in the employer contribution rates for the four representative were re-appointed during the year, having completed council employers, based on initial modelling; with the outlook for their first three years of office. The Board continued to provide other employers looking equally positive. This will provide some invaluable support on a range of issues, and links were established welcome relief for those employers who continue to face tight with the Pension Boards of the other LGPS Central partner funds, which budgetary pressures and funding level reductions. will help to support joint development and sharing of expertise going forward. Once again, I’d like to thank everyone who has worked for, or with the In the light of the Pension Regulator’s 21st Century Trusteeship Cheshire Pension Fund over the last twelve months for their support campaign and on-going national debate about governance and continued commitment. arrangements across the LGPS, the Fund commissioned an Mark Wynn independent review of its governance framework in the autumn Chief Operating Officer of 2018. A number of improvement recommendations will be Cheshire West and Chester Council Cheshire Pension Fund Annual Report 2018/19 3 Management and Financial Performance Scheme Management and Advisors (as at 31 March 2019) Administering Authority Local Pension Board members Cheshire West and Chester Council Peter Raynes Chairman (Independent) HQ, 58 Nicholas Street, Chester, CH1 2NP Councillor Robert Bisset Employer Representative Cheshire West and Chester Council Officers (Cheshire West and Chester Council) Mark Wynn Chief Operating Officer Adrienne Laing Employer Representative (Bridgewater High) Vanessa Whiting and Karen Mcllwaine Geoff Wright Member Representative (UNISON) Director of Governance and Monitoring Officer (job share) Neil Harvey Member Representative (GMB) Pension Fund Committee Asset Pool Operator Councillor Myles Hogg LGPS Central Limited Mander House, Mander Centre, Cheshire West and Chester Council (Chairman) Wolverhampton WV1 3NB Councillor Don Beckett Cheshire West and Chester Council* Investment Managers Councillor Brian Crowe Cheshire West and Chester Council* Adams Street Partners UK LLP 4th Floor, 75 Davies Street, London W1K 5JN Councillor Carol Gahan Cheshire West and Chester Council** Arrowgrass Capital Partners LLP Councillor Liz Durham Cheshire East Council* 3rd Floor, 10 Portman Square, Marylebone, London, W1H 6AZ Councillor Paul Findlow Cheshire East Council Baillie Gifford & Co Councillor Geoff Baggott Cheshire East Council* Calton Square, 1 Greenside Row, Edinburgh, EH1 3AN Councillor Sam Corcoran Cheshire East Council Blackstone The Blackstone Group, 40 Berkeley Square, London, W1J 5AL Councillor Russ Bowden Warrington Borough Council** BlueBay Asset Management Councillor Mike Wharton Halton Borough Council 77 Grosvenor Street, London, W1K 3JR Paul Matthews GMB Darwin Property Investment Management Limited *Following elections of 2 May 2019 the above Councillors either 11 New Street, St Peter Port, Guernsey, GY1 3EG retired or were not re-elected. New members joining the Janus Henderson Global Investors Committee have since been confirmed as: 201 Bishopsgate, London, EC2M 3AE Councillor Gareth Gould Cheshire West and Chester Council Legal & General Investment Management Councillor Paul Williams Cheshire West and Chester Council One Coleman Street, London, EC2R 5AA Councillor Carol Bulman Cheshire East Council Lexington Partners UK LLP 42 Berkeley Square, London, W1J 5AW Councillor Amanda Stott Cheshire East Council M&G Investments ** For 2019/20 the following councillors have been re-elected 10 Fenchurch Avenue, London, EC3M 5AG however have been replaced on the Committee by: Pantheon Ventures (UK) LLP Councillor Gina Lewis Cheshire West and Chester Council 10 Finsbury Square, 4th Floor, London, EC2A 1AF Councillor Cathy Mitchell Warrington Borough Council Patrizia UK Ltd 166 Sloane Street, London, SW1X 9QF Winton Capital Management Grove House, 27 Hammersmith