2018Annual Meeting

For members

2018Annual Meeting

Rodney Barton – Director

West Yorkshire Pension FundHighlights 2017/18

Nationally

• Pooling of Investments starts April 2018

• The Pension Regulator (TPR) – engagement with LGPS

• GMP reconciliation

• General Data Protection Regulation (GDPR)

Locally for WYPF

• Pooling of Investments –NP £46.8bn, largest UK infrastructure GLIL £1.8bn

• TPR –WYPF LPB / JAG /PANEL – training March 2018

• GMP reconciliation underway

• GDPR – part of CBMDC policies and processes – WYPF systematic review

West Yorkshire Pension FundFacts and figures 2017/18

Assets at 31 March 2018

• £13.6 billion

Employers in the fund as at 31st March 2018

• 443

Total membership

• 286,471

Value of WYPF assets

7.928.65 8.78

9.9410.37

11.32 11.21

13.63 13.57

0123456789

1011121314

2010 2011 2012 2013 2014 2015 2016 2017 2018

Assets (£billion) to 31 March

Investment Pooling• Northern Pool

• West Yorkshire PF + Greater Manchester PF + Merseyside PF

• Latest report shows

• Northern Pool has the lowest cost

• Performance above benchmark

• Total asset pooled £46.8bn

• GLIL – Investment in UK infrastructure £1.8bn committed, £1bn invested

• NPEP – Private equity live July 2018, £0.48bn committed for 2018/19, approved 3 investments totalling £0.2bn in September 2018

• Shadow Joint Committee meets every 6 weeks

• Delivered common custodian for NP, GLIL, NPEP

WYPF fund accountYear ended 31 March - £m

2018 2017 2016 2015

Contributions income471.2 427.9 416.6 407.6

Benefits payable (988.7) (515.3) (500.3) (642.3)

Management Fees(10.3) (10.3) (9.4) (7.3)

Net additions(527.8) (97.7) (93.1) (242.0)

Investment + other income 387.6 338.4 314.1 296.0

Net overall income into fund (140.2) 240.7 221.0 54.0

Change in market value of fund’s investments –increase/(decrease)

74.5 2,180.6 (329.2) 896.4

Net increase/(decrease) in fund’s assets (65.7) 2,421.3 (108.2) 950.4

Opening net assets of the fund 13,632.3 11,211.0 11,319.2 10,368.8

Closing net assets of the fund13,566.6 13,632.3 11,211.0 11,319.2

Contributions receivable

Year ended 31 March

2018 2017

£m £m

Employers’ contributions 296.2 271.7

Employees’ contributions 111.1 110.9

407.3 382.6

Non statutory pensions 22.1 22.7

Other 41.7 22.6

Total 471.1 427.9

Benefits payable

Year ended 31 March

2018 2017£m £m

Pensions (380.9) (370.1)

Lump sums (105.0) (102.4)

(485.9) (472.5)

Non statutory pensions (22.1) (22.7)

Other (480.7) (20.1)

Total Benefits paid (988.7) (515.3)

Admin expenses (10.3) (10.3)

Total (999.0) (525.6)

Employers & membership 2017/18

• 473 employers paid contributions during 2017/18– Scheduled 280

– Admissions 163

– Employers ceased during 2017/18 30

– Employers as at 31 March 2018 443

• Number of Employers increased by 21 in 2017/18

• Active members – 102,017

• Joiners and leavers in 2017/18– Joining 22,046 Retiring 2,865

– Other leavers 9,192

• Retirements 2017/18 – Normal 2,186 Incapacity 380

– Early 2,489 Late (over 65) 446

– Redundancy 706

Examples of Key Performance Indicators – 2017/18

WorktypeTotal cases

Target days

Target cases

met

KPI Target

Actual KPI

Payment of pensions (pensioners + beneficiaries)

1,042,404 Due days 1,042,404 100% 100%

Retirement Actual 2,863 3 2,625 90% 91.7%

Payroll changes 1,941 5 1,866 90% 96.1%

Pension estimate 6,317 10 4,816 75% 76.2%

Refund Payments 2,704 10 2,655 95% 98.2%

West Yorkshire Pension FundAdministration 2009 to 2018

31 March 2009

• West Yorkshire LGP

• West Yorkshire Fire & Rescue

• West Yorkshire Police

31 March 2018

• West Yorkshire LGPS

• Lincolnshire LGPS

• West Yorkshire Fire & Rescue

• Lincolnshire Fire & Rescue

• North Yorkshire Fire & Rescue

• Humberside Fire

• South Yorkshire Fire & Rescue

• Royal Berkshire Fire

• Buckinghamshire & Milton Keynes Fire

• Northumberland Fire

West Yorkshire Pension FundAdministration 2009 to 2018

31 March 2009 31 March 2018

Assets

• £5.9billion £13.6 billion +130%

Employers

• 190 705 +270%

Membership

• 218,185 377,460 +73%

Comparative management costs (2017/18)

14.35

28.13

0

5

10

15

20

25

30

Administration (rank = 7th)

WYPF

LA average

20.48

176.51

0

20

40

60

80

100

120

140

160

180

Investment Management

(rank = 1st)

WYPF

LA average

38.03

262.64

0

50

100

150

200

250

300

Total cost (rank = 1st)

WYPF

LA average

3.10

9.26

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

Oversight & Governance

(rank=9th)

WYPF

LA average

Average annualised investment returns 2017/18

1 years 3 years 5 years 10 years

WYPF 3.3% 7.8% 7.9% 7.3%

WYPF Benchmark 3.2% 7.5% 7.7% 7.2%

Outperformance 0.1% 0.3% 0.2% 0.1%

Actuarial valuation

Actuarial valuation undertaken every three years by fund actuary

• 2007 89%

• 2010 93%

• 2013 96%

• 2016 94%

Summary

• WYPF takes long-term view

• WYPF financially very sound with positive cash flow of over £309 million in 2017/18

• Awards

– LAPF Scheme Governance

– PP Best DB Scheme Innovation

• Pensions in payment guaranteed, and not affected by movements in stock markets and investment returns, or changes to LGPS

InvestmentsGeneral Economic and Market SceneNovember 2018

Noel MillsIndependent Investment Advisor to WYPF

Economic Background to Stock Markets During 2017/18

• Faster synchronised global economic growth

• Higher oil prices impact global inflation

• Rising US and UK interest rates

• Beginning of the end of “quantitative easing”

• Fiscal austerity eased but debt at record levels

• Sterling recovers after initial post “Brexit” decline

• UK: higher inflation and slower economic growth

Movements in Major Stock MarketsTotal Return

% Change

Mar 17/Mar 18

Local Currency

% Change

Mar 17/Mar 18

Sterling

% Change

Mar 18/Sep 18

Local Currency

% Change

Mar 18/Sep 18

Sterling

UK FTSE All Share + 1.2 + 1.2 + 8.3 + 8.3

World ex UK FTSE + 12.5 + 3.1 + 7.6 + 13.1

US FTSE + 14.2 + 1.8 + 11.2 + 19.6

Europe ex UK FTSE + 4.0 + 4.1 + 4.7 + 7.1

Japan FTSE + 15.1 + 7.5 + 7.6 + 8.4

Pacific ex Japan FTSE + 12.0 + 1.9 + 1.7 + 5.3

Emerging Markets FTSE + 19.4 + 8.8 - 3.2 - 1.8

Movements in Major Stock Markets

40

60

80

100

120

140

160

180

200

220

240

Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18

UK US Europe ex UK Japan Emerging Markets

Valuation of Major Stock MarketsPrice Earnings Ratios

Mar

2017

Mar

2018

Sep

2018

Average 1973-2007

UK 24 12 13 16

World ex UK 19 18 18 18

US 21 22 23 17

Europe ex UK 18 14 14 15

Japan 16 16 13 38

Pacific ex Japan 16 13 12 17

Emerging Markets 13 15 14 15

UK Stock Market Total Returns by Market Capitalisation

% Change

Mar 2017/

Mar 2018

% Change

Mar 2018/

Sep 2018

FTSE All Share + 1.2 + 8.3

FTSE 100 + 0.2 + 8.9

FTSE 250 + 5.3 + 6.1

FTSE Small Cap + 6.0 + 6.0

UK Stock Market 2017/18Sector Returns Relative to FTSE All Share Index

-30% -20% -10% 0% 10% 20% 30% 40%

Autos & Parts

Chemicals

Mining

Industrial Engineering

Oil & Gas Producers

Food Producers

Software & Computer Services

Utilities

Tobacco

Fixed-line Telecoms

Lowest Returns Highest Returns

Official Interest Rates US rates moving higher

-1

0

1

2

3

4

5

6

Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Mar 16 Mar 17 Mar 18

%

UK US Eurozone Japan

Government Bond Yields Trending higher

-1

0

1

2

3

4

5

6

Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18

UK US Germany Japan

Sterling Exchange RatesPost “Brexit” Decline

0.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

08 09 10 11 12 13 14 15 16 17 18

£/Euro

110

130

150

170

190

210

08 09 10 11 12 13 14 15 16 17 18

£/Yen

1.10

1.20

1.30

1.40

1.50

1.60

1.70

1.80

1.90

2.00

2.10

08 09 10 11 12 13 14 15 16 17 18

£/US Dollar

Economic & Market Outlook

• Global economic growth moderating

• Higher oil prices and modest rise in global inflation

• Risks: geopolitical tensions, trade wars, global indebtedness

• Interest rates continue to rise as QE is unwound

• “Brexit” uncertainty leading to slower UK economic growth

• Bonds still very expensive and yields likely to move higher

• World ex-US equity markets are not expensive

2018Annual Meeting

WYPF Investments

Mark StevensExternal Investment Adviser to WYPF

WYPF – Movement in Asset

Distribution of Investment Portfolio

31.03.17 31.03.18

Equities 70.3 68.1

Fixed Interest 13.8 14.8

Alternatives

(including Property)14.6 15.0

Cash 1.3 2.1

100.0 100.0

Changes to Fund value over the Financial Year

Figures shown in ‘000s

Fund Value at 31/03/17 £13,531,000

Net Transactions £134,000

Market Impact £123,000

Fund Value at 31/03/18 £13,788,000

Investment of Cash flow 2017-18

Alternatives:

• Private Equity and Infrastructure GLIL,

• Listed Alternatives

Bonds :

• Selective Corporate Bond investment

Equity:

• No allocation to equity , net sales made towards year end

• Cash:

• Funding commitments to property

• Preparation for First Bus cash withdrawals

New cash flow allocated during 2017/18

£m

Equities 0

Fixed Interest 5

Alternatives: Listed Alternatives 22

Alternatives: Hedge funds 0

Alternatives: Property 23

Cash 100

Total 150

Investment of

New Money

Market Impact During 2017/18

£m

Equities 50

Fixed Interest -25

Property 37

Listed Alternatives -15

Hedge Funds 5

Private Equity 71

Total 123

Changes in the

value of asset

class from

market

movements

WYPF Investment Returns

WYPF 3.3%

Benchmark 3.2%

Local Authority Medium 4.0%

Year to

31st March 2018

Long Term Investment PerformanceAnnualised to 31/03/2018

1 year 3 years 5 years 10 years

3.30

7.80 7.90 7.30

3.20

7.50 7.70 7.10

WYPF

Custom

Benchmark

Long Term Investment PerformanceAnnualised to 31/03/2018

1 year 3 years 5 years 10 years 20 years

3.30

7.80 7.90 7.30

6.60

4.00

7.70

8.50

7.50 6.10

WYPF Local Authority Medium

Asset allocation against the Local Authority Universe March 2018

Equities Bonds Propery Alterntatives

68.00

15.00

5.00

10.00

55.00

18.00

9.00

15.00

WYPF Local Authority Average

Asset allocation changes in the Local Authority Universe last financial year

Equities Bonds Propery Alterntatives

62.00

15.00

8.00

13.00

55.00

18.00

9.00

15.00

LGPS 2016/17

Local Authority Average 2017/18

Long Term Equity PerformanceAnnualised to 31/03/2018

3 year 5 year 10 year 20 year 30 year

11.40 11.70

9.70

7.80

9.40

5.80

7.00 7.20

5.30

8.90

Global Ex UK Equity UK Equity

Investment returns and inflation Annualised to 31/03/2018

3 years 5 years 10 years 20 years

7.80 7.90 7.30 6.60

2.70

2.30

2.80 2.80

WYPF RPI

Changes to Fund value over new Financial Year June-

September

Figures shown in ‘000s

Fund Value at 31/03/18 £13,788,000

Net Transactions £39,000

Market Impact £814,000

Fund Value at 30/09/18 £14,641,000

Investment Strategy Going Forward

Strategic

• Review of strategic asset allocation

• Three year actuarial review

• Continued integration of the £45bn Northern Pool

• Review operation of panel and training plan

• Joint private equity investment initiative (NPEP)

Tactical

• Optimal cash flow planning

• Mindful of risks and opportunities surrounding Brexit

• Infrastructure: GLIL co-operation, direct property

Questions

Thank you