TEESSIDE PENSION FUND

Administered by Middlesbrough Council

AGENDA ITEM 8

INVESTMENT PANEL REPORT

1

28 SEPTEMBER 2016

INTERIM CHIEF FINANCE OFFICER – MARK TAYLOR

CURRENT ASSET ALLOCATION REPORT

1.PURPOSE OF THE REPORT

1.1At the last meeting of the Investment Panel on 29 June 2016, the Independent Investment Advisors were asked to provide a written report which sets out the current asset allocation compared to the customised benchmark and average LGPS Fund’s allocation. The Advisors’ report is attached as Appendix A.

2.RECOMMENDATIONS

2.1That Members note the report of the Independent Advisors and its conclusion that:

“Given the recent history of capital market conditions and the circumstances of how the Fund reached its current asset allocation position, we are satisfied that these positions are correct at this time, even when compared to the current customised benchmark and when compares to other LGPS Funds.”

2.2 Consider the “challenge points” set out in section 4 regarding the current asset allocation and the existing variance to both the customised benchmark and other LGPS Funds.

2.3That Members agree an action plan which sets out a strategy for rebalancing the portfolio back towards the customised benchmark.

3.FINANCIAL IMPLICATIONS

3.1The asset allocation decisions made at each Panel meeting have an impact on the performance of the Fund. The past asset allocation has produced a lower return in 2015, the last three years and the last 10 years than both the benchmark return and the All Funds return.

4.FURTHER ANALYSIS AND “CHALLENGE POINTS”

4.1The Independent Investment Advisors were asked at the last Panel meeting to provide a report which sets out the reasons behind the current asset allocation of the fund compared to the customised benchmark and the average LGPS Fund. Subsequently, the Chair has requested a proposed action plan which sets out the strategy for the Fund to rebalance towards the customised benchmark, and wants to provide Panel Members with the opportunity to challenge the current asset allocation ahead of a final action plan. In order to prompt points to challenge the existing asset allocation and devise an action plan, some further analysis and suggested “challenge points” will assist Panel Members. As stated in the Independent Investment Advisor’s report, the asset allocation as at 31 March 2016 is:

Asset Class

Fund

Customised Benchmark

Fund v. CB

LGPS Average

Fund v. LGPS Av.

Growth Assets:

UK Equities

36

30

+6

21

+15

Overseas Equities

48

40

+8

41

+7

Property

7

10

-3

8

-1

Alternatives

2

5

-3

10

-8

Protection Assets:

Bonds

3

13

-10

17

-14

Cash

4

2

+2

3

+1

TOTAL

100

100

0

100

0

4.2To correctly match performance against this asset allocation, the performance data available for periods up to 31 March 2016 is shown in the table below:

1 year

3 year

5 year

10 year

20 year

% p.a.

% p.a.

% p.a.

% p.a.

% p.a.

RPI

1.6

1.6

2.3

3.0

2.8

Fund Return

-2.3

3.7

4.8

5.5

7.1

Benchmark Return

0.2

6.6

7.3

5.9

6.9

All Funds Return

0.2

6.4

7.1

5.6

6.8

Relative Performance

-2.4

-2.7

-2.3

-0.4

+0.2

Asset Allocation

-1.7

-1.5

-1.5

-0.7

-0.3

Stock Selection

-0.7

-1.2

-0.7

+0.4

+0.5

State Street WM Company Q1 2016 Performance Report

4.3The Independent Investment Advisors acknowledge the extreme variation to the customised benchmark, particularly with regards bonds and equities, and repeatedly set out their reasons for these variation. Deeper analysis into the assets classes shows their contribution to the Fund’s relative performance is:

Asset Class

1 Year

3 Year

10 Year

Asset

Stock

Asset

Stock

Asset

Stock

Growth Assets:

 

 

 

 

 

 

UK Equities

-0.3

-0.1

-0.2

-0.3

0

0.1

Overseas Equities

-0.6

-0.2

-0.9

-0.3

-0.5

0.5

Property

-0.4

-0.1

-0.3

-0.2

0

-0.1

Alternatives

-0.2

-0.2

0

-0.2

0

-0.2

Protection Assets:

 

 

 

 

 

 

Bonds

-0.3

0

0.1

-0.1

-0.1

-0.1

Cash

0.1

0

-0.1

0

0.1

0

TOTAL

-1.7

-0.7

-1.5

-1.2

-0.7

0.4

State Street WM Company Q1 2016 Performance Report

4.4The figures in the above table show the impact on the whole Fund’s relative performance from each asset class. (There are some roundings which is why they do not equate to the total relative performance.) The largest negative impacts over both the 1 and 3 year periods reported above have occurred in growth assets.

4.5AON Hewitt’s Capital Assumptions, summarised in the Investment Advisors report (Appendix A), does not provide forecast annualised performance returns for alternative investments. The 5 year forecast returns for property and equities are much greater than those forecast for bonds, as reported in Appendix A, reflecting the Fund’s growth assets to protection assets position.

4.6However, Panel Members should note that the overweight position in growth assets is made up of a large overweight position in equities and underweight positions in property and alternative assets. In addition, the large overweight position in equities is concentrated in UK equities and Far East Asia equities, with European, Japanese and US equities weighting near neutral.

4.7CHALLENGE POINT 1 – Are the weighting positions in growth assets, between both the asset classes of equities, property and alternatives, and also within equities to ensure the mix is appropriate. Is action needed to rebalance within growth assets?

4.8CHALLENGE POINT 2 –Are the type of investments made for each asset class efficient and effective. For example, good progress has been made with direct property investments over the past three years, rebalancing the direct property portfolio and increasing the investment by £77 million. Investing in direct property gives more certainty over the quality of the assets the Fund owns, giving Panel Members greater control over the investments. However, the customised benchmark is 10% of the Fund, and a quicker route to a neutral weighting would be through use of managed funds.

4.9The Fund is currently carrying out the triennial Actuarial Valuation. This Valuation calculates the funding position of the Fund, and sets the Fund’s (and its employer’s) contribution rate. The results of the Actuarial Valuation are likely to have an effect on the Fund’s investment strategy. The proposed assumptions used by the Actuary in the Valuation are:

2013 Valuation

Funding Assumptions

Proposed 2016 Valuation

3.3% p.a.

RPI Increase

3.1% p.a.

2.4% p.a.

CPI Increase

2.0% p.a.

3.9% p.a.

Salary Increases (before promotional increases)

2.5% p.a.

2.4% p.a.

Pension Increase

2.0% p.a.

5.4% p.a.

Discount Rate

4.7% p.a.

4.10The additional income from the future service rate will increase contribution income received from Scheme Employers. The recent experience of contributions received compared to pension payments is shown in the graph below:

4.11As the Fund is maturing, investment income is required to assist the payment of Pensioner Members. The Fund’s Report and Accounts is also showing that expenditure before investment income is exceeding contribution income. From the last three Report and Accounts, net receipts has turned to net withdrawals:

Financial Year

Reported

Adjustment

Net Withdrawals

2013/14

£4.6m

-£27.8m

-£23.2m

2014/15

-£109.6m

+£76.0m

-£33.6m

2015/16

-£41.3m

-

-£41.3m

4.12Panel Members should note that:

· In 2013/14, the Fund benefitted from an inward transfer of £27.8 million from Durham Probation Service, and

· In 2014/15, the Fund transferred £76 million to the Greater Manchester Fund for the transfer of the Durham & Tees Valley Probation Trust.

4.13After taking these into account, the Report & Accounts replicates the above graph showing the Fund is paying more out than it receives in income (see the Net column in the table above). This situation causes a drag on stock selection performance as the benchmark indices for equity and bond markets assumes full income re-investment.

4.14The customised benchmark is usually reviewed after the Actuarial Valuation results to ensure the benchmark is still appropriate for the Fund to achieve and remain fully funded. The Investment Advisor report refers to the previous Asset/Liability Study (ALS) presented and agreed by the Investment Panel in 2014. The main outcome from the ALS was a new customised benchmark and benchmark indices for each asset class.

4.15CHALLENGE POINT 3 – Given the Fund increasingly needs more income from investment to support its day to day activities, should the next ALS give some focus to providing more investment income, in addition to providing a strategy to achieve fully funded status over the long term. Investment income has risen over the past three years, particularly from equities, but not at the same pace as net withdrawals reported above. Forecasts for future net withdrawal amounts are not available without the results of the Actuarial Valuation and a better understanding of future Scheme Employer plans. However, should the customised benchmark be split into three, growth assets, protection assets and income producing assets?

4.16The Investment Advisors have long held the position that bonds are overvalued and not an appropriate investment for the Fund since, at these yields, they will not meet the actuarially required rate of return. This position has in turn led to the Investment Advisors recommending further investments into growth assets and equities in particular. Equities continue to pay dividends and, over the long term, will grow in line with economies.

4.17As Panel Members know, the Investment Advisors’ position on bonds and equities has been reported consistently over many years. The Investment Advisors continue to monitor these markets looking for opportunities to rebalance the portfolio once bond yields normalise.

4.18CHALLENGE POINT 4 – Should the Panel continue to monitor the bond and equity markets for opportunities to rebalance these asset classes, or rebalance sooner? The benefit of rebalancing sooner are not in future investments returns, but providing assets which preserve capital and, traditionally, provide an Actuarial benefit for matching to the Fund’s liabilities.

4.19CHALLENGE POINT 5 – Should other types of investments which have bond type characteristics, but are riskier in nature, e.g. senior debt or multi-asset credit funds, be considered now or as part of the ALS and the new customised benchmark.

5.PROPOSED ACTION PLAN

5.1The proposed action plan is set out below:

Proposed Action Plan

Proposed Date

1.

Panel Members debate and consider whether the current asset allocation is adequate for the Fund or whether the Fund should rebalance towards the customised benchmark.

Now & on-going

2.

Continue to monitor bond and equity markets to identify opportunities to rebalance these asset classes.

On-going

3.

Review the current allocations for Property and Alternative investments, and the mix within equities.

Q4 2016

4.

Undertake an Asset/Liability Study once the Actuarial Valuation is complete. Consider as part of the next ALS increasing investment income, in addition to achieving fully funded status.

Q1/Q2 2017

5.

Implement the new customised benchmark and benchmark indices, and consider again whether the Fund should rebalance back towards the new customised benchmark.

Q2 2017

CONTACT OFFICER:Paul Campbell (Head of Investments & Treasury Management)

TEL. NO.:(01642) 729024

Independent Investment Advisor Report – August 2016.

I have been asked to submit a report to the Chair of the Investment Panel in light of the disappointing Fund performance report and the divergence of the Fund’s portfolio from the benchmark and the average of other funds. I think that it is important to set out the context against which strategic investment decisions are taken; the actuarial valuation and the Asset Liability Study feeding through to the construction of the strategic benchmark.

The Administering Authority is required by Regulation 62 of the Local Government Pension Scheme (Administration) Regulations 2013 to appoint an actuary to carry out a full valuation of the Fund every three years. The main purpose of the valuation is to review the financial position of the Fund and to determine the rate at which employing bodies in the Fund should contribute in the future to ensure that the returns from existing investments when combined with future contributions from both employers and scheme members will be sufficient to meet future benefit payments which the Fund will be required to make. The actuary must have regard to the desirability of maintaining as stable a contribution rate as possible.

The valuation includes assumptions on the likely returns on different types of investments and uses a weighted average return in order to calculate the net present value of Fund liabilities. The valuation does not make any recommendations regarding the type and mix of investments assets which would best meet the current and future requirements of the Fund.

It has become standard practice to carry out an Asset/Liability Study (ALS) for the Fund once the outcome of the valuation process is finalised. The purpose of the ALS is to look at the Fund’s requirements over the medium and long term and to devise a mix of investments which, it is anticipated, will produce the returns required to meet the Fund’s actuarial liabilities in the medium and long term. The key factor is the percentage of the Fund invested in Growth Assets (equities, property and alternatives) and Protection Assets (bonds and cash). As the titles imply, Protection Assets are lower risk than Growth Assets, which offer potentially higher returns in exchange for a greater degree of risk.

The most recent ALS was undertaken in 2014 by the Fund actuary Aon Hewitt in conjunction with the investment advisors. In reality, as there is no prescribed method for carrying out an ALS, different actuarial firms undertake them in different ways. The outcome, however, is always the same; to produce a recommended investment mix best suited to meet the liability profile of the Fund in question.

The ALS carried out by Aon Hewitt sought to test different investment strategies to determine the most appropriate. In summary these were:

1. Scenario 1 : 100% invested in growth assets (equities, property and alternatives);

2. Scenario 2 : 85% invested in growth assets and 15% invested in protection assets (bonds and cash);

3. Scenario 3 : 65% invested in growth assets and 35% invested in protection assets.

The three scenarios represent a “risky” strategy, the existing strategy (in 2014) and a “defensive” strategy. In all three scenarios the assumptions regarding employer contributions, scheme membership numbers, longevity and the discount rate to be applied when carrying out the actuarial valuation remained the same.

The actuary calculated for each scenario a projected funding ratio. In order to calculate the ratios the actuary used their Capital Market Assumptions in order to project how the Fund’s funding position will evolve going forward. The Capital Market Assumptions are made up of Aon Hewitt’s estimates and a range of estimates from other financial services institutions. They are the projected annualised returns from all major asset classes, taking into account volatility and correlation assumptions which give the best estimate of future long-term annualised returns.

The Investment Panel on 10 December 2014 considered the full Aon Hewitt report. In summary the report concluded that the Fund’s existing strategy (scenario 2), with a higher than average allocation to growth assets compared to other LGPS Funds, had the same chance of “success” (defined as a funding ratio over 100% after 11 years) as both scenarios 1 & 3.

As part of the ALS the actuary calculates the Value at Risk (VaR) on an investment. VaR is defined as the maximum loss expected (on a worst case scenario) on a particular investment, over a given period of time, and with a certain level of confidence. The actuary calculates the VaR for the three scenarios set out in the ALS. The actuary identifies from the VaR calculation that under all three scenarios the biggest risks as:

· Equity risk is the main contributor to the VaR under all three scenarios;

· Risk (on the Var measure) could be materially reduced by diversifying the growth portfolio beyond equities.

The conclusions and recommendations of the ALS were:

· The Fund’s existing strategy (scenario 2) is expected, on average, to deliver a funding ratio of above 100% at the end of the current 11 year deficit recovery period. The strategy has a higher than average allocation to growth assets compared to other LGPS Funds. However, the analysis shows that this strategy has the same chance of success as both the more risky and defensive allocations;

· Greater allocation to protection assets would ensure that the size of any deficit would be reduced if assumptions regarding the relative performance of growth and protection assets were not met, but also reduce the chance of a higher funding level;

· The risks associated with scenario 2 could be reduced with greater diversification within the growth element of the Fund.

The ALS produces a customised benchmark, which is a mix of assets which meet the requirements of the ALS over the long term and are considered appropriate to provide the returns required for the Fund to be fully funded. The customised benchmark is not a short term investment recommendation. The investment advisors, on a quarterly basis, make recommendations which may be significantly at variance from the benchmark in order to take advantage of short term market opportunities. The benchmark (set out below) was varied as a result of the ALS and it was agreed performance against the revised benchmark would be measured from 1 January 2015.

Investment Asset

%

Benchmark Index

Growth Assets

85

UK Equities

30

FTSE All Share

Overseas Equities:

40

US Equities

12

S&P 500

European Equities

11

EuroStoxx 600 Ex UK

Japan

5

TOPIX 500

Asia Pacific Ex Japan

12

Bloomberg Asian Pacific Ex Japan

Property

10

IPD Annual

Alternatives

5

Actuary’s Required Rate of Return (5.4% pa at the last Valuation)

Protection Assets

15

UK Bonds

7

FTSE All Gilt

UK Index Linked

4

FT Index Linked > 5 Years

Overseas Bonds

2

RPI (as at December – year on year)

Cash

2

LIBID 7 Day Rate + 0.075%

Total

100

In order to control risk, the % of the total Fund held in actual investments must be within set parameters. These are set out in the Fund’s Statement of Investment Principles (SIP) and can only be varied with the agreement of the Investment Panel. So, for instance, the total of Property held must be within the range 5% to 15%. These ranges have to be reasonably wide as market fluctuations, sometimes exacerbated by currency movements, can result in significant changes in short periods of time.

The Fund Manager, in his quarterly report to the Investment Panel, reports on the actual weighting of investments held in each asset class and compares this with the benchmark weighting and the latest available comparable figure for the average LGPS Fund. This is the position in March 2016, reported to the Panel in June 2016:

Asset Class

Fund

Benchmark

Average

Growth Assets

UK Equities

36

30

21

Overseas Equities

48

40

41

Property

7

10

8

Alternatives

2

5

10

Protection Assets

Bonds & Cash

7

15

20

TOTAL

100

100

100

The SIP sets out the role and responsibilities of the Fund’s investment advisors:

· Advising the Panel on the most appropriate short term asset allocation for the Fund, given the up to date economic and financial market conditions at each meeting;

· Recommending to the panel the appropriate investment management structure for the Fund;

· Advising the Panel on the most appropriate long term asset allocation for the Fund as part of the Asset/Liability Study;

· Advising the Panel in the preparation and review of the Statement of Investment Principles;

· Advising the Panel in their regular monitoring of the performance of the Investment Managers;

· Advising the Chief Finance Officer on matters relating to the strategic direction of the Fund.

The investment advisors direct the investment managers on short term investment strategy. This is done chiefly through the medium of the verbal presentation to the quarterly Investment Panel meeting but also involves an element of fine tuning between meetings. Clearly it is unfeasible to manage the strategy of a £3 billion Fund by making decisions once every three months, so the investment advisors are more realistically adjusting the direction of travel, with the customised benchmark being the target, albeit within a very flexible timeframe. The approach at the Teesside Fund has always been collaborative with the investment advisors working with the internal investment team to devise long term strategy and implement short term strategy. That does not blur where the responsibilities lay. The investment advisors are responsible for asset allocation and the investment managers are responsible for stock selection.

Performance is measured against the customised benchmark (the WM company calculates the return the Fund would have achieved if the asset allocation had been in line with the customised benchmark) and against the All Funds universe. The universe is made up of public and private sector funds, not just LGPS funds. The calculation is on a calendar year basis and the outcome is reported to the Investment Panel in June. The financial year returns (to end March), which facilitate comparison with other LGPS funds are also calculated and reported in the Statement of Accounts.

It is useful to look again at the performance report for the period to end December 2015, which was presented to the Investment Panel in June 2016. Returns presented are for 2015 and the 3 year and 10 year annualised as is standard practice. The returns achieved and the impact on those returns from asset allocation and stock selection decisions can be summarised:

2015

3 year

10 year

%

%

%

Fund Return

2.2

6.1

6.0

Benchmark Return

4.1

9.1

6.3

All Funds Return

2.9

8.5

6.2

Asset Allocation

-1.0

-1.4

-0.7

Stock Selection

-0.8

-1.4

+0.4

The questions which this review must address are:

“why has fund performance been below what has been achieved in the past?” and

“why does the Fund mix of investments differ so much from the Fund benchmark and the average fund?”

Regarding Fund performance, the annual report on performance, as summarised above, clearly shows that the impact of both asset allocation and stock selection was negative for 2015 and over the last 3 years. Over the 10 year period stock selection was positive, while the impact of asset allocation was negative.

It is not the purpose of this report to look in detail at stock selection, but it is worth noting that this has deteriorated over the last few years. Is there a reason for this? The loss of some key experienced investment managers must have played a part and the process of replacing them with trainees who can then be developed (a process which has been successful in the past) has proven difficult for reasons which would bear further study.

Regarding asset allocation the Fund has suffered not because of its high weighting in equities, both against the customised benchmark and the average fund, but because the Fund is heavily exposed to the UK and Far Eastern (ex Japan) markets which have performed worse than the US, European, Japanese and the much smaller Other International categories. The Fund’s very low weighting in bonds, although not a negative factor in 2015, has also proven to be detrimental over the last 5 years. The Fund has also been underweight, both against the customised benchmark and the average fund, in Alternatives and Property. Both these stances have had a negative impact, compounded by the fact that, within the Alternative category, the Fund has taken a conscious decision to avoid private equity and hedge funds which have performed better recently than commodities.

Considering firstly asset allocation and the divergence from the customised benchmark, the Fund has been run on a conviction-based investment strategy for many years and this has proven to be successful over the long term. But the last few years has been something of a perfect storm where the strongest-held views; that bonds offer little value and do not meet the actuarial requirements of the Fund, that Far Eastern equity markets would continue to reflect the growth prospects of the Region and that certain forms of Alternative investments should be avoided, have not worked to the advantage of the Fund. It could reasonably be argued that the Fund has moved too far away from the benchmark, particularly in reducing the weighting in bonds. This has been driven by the conviction that bonds are overvalued on a fundamental basis, largely as a result of Government action which, in the UK, has manifested itself in the Quantitative Easing programme. This programme must be unwound at some stage and bonds will return to more normalised valuations. Of course when the weighting in one asset class decreases another must be increased and the Fund has sought to increase exposure to non-sterling equity investments, pushing the weighting in overseas equities well above the benchmark. This will have protected the Fund from the post-Brexit Sterling weakness to a significant degree. The investments advisors must take responsibility for these outcomes.

When looking at the Fund asset allocation against other funds I can see no valid reason to try to mirror what other funds do. Each fund is unique with its own mix of assets and liabilities and, especially with private sector funds, their own regulatory obligations. I can understand that peer comparison which looks at percentile rankings is a useful tool when assessing performance. But to allow that to dictate asset allocation decisions on the basis of following the herd seems to me to be in conflict with the principles which have governed the way in which the Fund has been run for many years.

The ALS addressed some of these issues. It was not critical of the Growth bias of the Fund, as has been set out earlier. It did, however, include the recommendation for consideration that the Fund should consider a more diversified Growth portfolio which could be constructed to deliver the same long-term expected return, but with lower volatility (risk), thereby reducing exposure to equities. The possible diversifiers included in the ALS were;

· Infrastructure

· Alternatives (such as absolute return bonds, multi assert credit and diversified growth funds)

· Property

· Hedge funds (not Fund of Hedge funds)

· Insurance-linked securities

Consideration was given to these recommendations by the investment advisors. The Fund has invested in infrastructure in the past, with mixed results and still holds some infrastructure investments. The advisors make regular recommendations regarding the desirability of seeking out suitable infrastructure investments but recognise that the size of the Teesside Fund makes it difficult for the Fund to participate other than collectively and the “pooling” proposals currently being developed for the LGPS may make it prudent to await the development of suitable structures. Also the Fund has been increasing its property portfolio towards the 10% customised benchmark weighting.

Regarding the other types of investment, consideration should be given to anything which meets the requirements of the Fund, notwithstanding a healthy degree of scepticism regarding hedge funds. However it should be recognised that the esoteric nature of some of the proposed diversifiers and the accordant risks may require expertise and, equally importantly, the time to fully appraise and evaluate opportunities as they arise, and these are not obviously available at the moment.

Although not the purpose of this report I think it is important to look forward. The ALS was completed on the basis of Aon Hewitt Capital Market Assumptions at the time the ALS was compiled. To recap, these are made up of Aon Hewitt’s estimates and a range of estimates from other financial services institutions. They are the projected annualised returns from all major asset classes, taking into account volatility and correlation assumptions which give the best estimate of future long-term annualised returns. These are, of course, estimates but they do reflect industry expectations and not just those of the Fund’s investment advisors. The latest ( March 2016) set of Aon Hewitt Capital Assumptions available show the 5 year annualised return assumptions (in £) for the major asset classes. These, it is recognised, are pre Brexit, but the behaviour of markets since the referendum suggests that revised assumptions would not differ greatly from the figures shown, which support the Fund’s position of favouring growth assets over protection assets:

Bonds

Index Linked

Equities

Property

US

1.6%

US

2.4%

US

6.4%

US

6.1%

UK

1.4%

UK

1.9%

UK

6.8%

UK

5.8%

Euro

0.6%

Euro

1.5%

O’Seas

7.1%

Euro

6.6%

That is not to say that the above-benchmark weighting is justified or that it should be maintained. It is a product of recent decisions which have been taken in light of unprecedented market conditions. Recent investment activity has been targeted towards selling equities into the post Brexit market strength and Sterling weakness and will have had the effect of reducing the level of divergence from the benchmark.

CONCLUSION:

Given the recent history of capital market conditions and the circumstances of how the Fund reached its current asset allocation position, we are satisfied that these positions are correct at this time, even when compared to the current customised benchmark and when compared to other LGPS Funds.

· This report sets out the reasons for the large variances in equities and bonds compared to the customised benchmark and we continue to stand by these positions given current market conditions.

· Cash is currently being used as a tool for investment when market opportunities arise, and allowed to build up when market opportunities allow for divestment.

· The report acknowledged the progress made in the property allocation and consider the asset picking process in direct property as the correct method of building this allocation closer to the customised benchmark.

· In Alternatives, further progress in infrastructure investments has been regularly recommended, but progress cannot be at any cost.  Given the history of our investments with mixed results, and the high management fees that have been required with infrastructure funds, we are happy with the current position but will continue to recommend further investment in this asset class.

This report also acknowledges that an Asset/Liability Study will be undertaken soon, after the Actuarial Valuation is concluded, and we look forward to participating in this and assisting in setting the new customised benchmark.

Fred Green & Peter Moon

August 2016

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