Greens question Council pension investment in hedge fund
7 May 2012
Question to leader of the council
By: Councillor maya de souza
Leader of the Council will know, several years ago the Council had a
discussion about an ethical investment policy for Camden's substantial
pensions fund following questions
raised by Green Councillors. We were told that the Council would not
agree to avoid certain sectors but instead would seek to influence
companies from within. There has been little evidence of this, and now
the Council seems to be going one step further in
the opposite direction by deciding to invest some of Camden's Pension Fund in Hedge Funds, which are funds unregulated by the Financial Services Authority.
I expect the Leader of the Council will also know that hedge funds have racked up substantial profits in recent years, because of the unfair advantages they have and lack of regulation, and have been key players in increasingly speculative and unstable financial services markets. Their profits have largely been at the expense of other investment funds. They have played a major part in creating the crisis that led to the bankers’ bailout that has so badly affected our debt situation.
Can you please explain how the administration would justify this decision to invest in hedge funds? Does it condone the excessive speculation and gambling of the financial services sector and choose to support a sector, which many would regard as gamblers who make large gains at the expense of others?
The responsibility for the Pension Fund is a non-executive function and by law is delegated (at Camden to the Pensions Sub Committee).
The Pension Fund continues to have a keen interest in Socially Responsible Investment (SRI) and the Fund has been involved with the corporate governance agenda since investment professionals seriously started to consider good governance (dating back to the 1980s). The Statement of Investment Principles is clear about the Fund’s SRI policy which is one of engagement. It expects Investment Managers who invest sums on behalf of the Fund to have regard to the impacts that SRI issues might have on the returns of companies held on behalf of the Fund.
The Fund is involved at many levels with the work of the LAPFF, not least via the Chair of the Cross-Party Pension Sub Committee inclusion onto the Executive of the LAPFF. The Local Authority Pension Fund Forum is a group of 55 Local Authorities with over £100bn of assets under management who commission work in this area and lobby for charges to corporate governance issues.
On the 14 September 2010 the Pensions Sub Committee considered the legality of further ethical approaches to investment including screening of certain companies. The legal opinion drew on well-known case law in this area and concluded that moral and ethical considerations cannot be considered in preference to financial returns in respect of any particular investment. Decisions on any particular investment must be made on standard criteria (financial returns, security, diversification etc).
Camden takes its corporate governance responsibilities very seriously and ensures it votes whenever it has rights to. Manifest provide corporate governance advice to the Fund, and at the Pensions Sub-Committee meeting on 29th November 2011 the Fund adopted a detailed policy on voting guidelines based on principles developed in agreement with Manifest and based on those recommended by LAPFF.
The Fund closely follows the work of LAPFF and the reports back to the Pensions Sub-Committee quarterly. This report has recently been remodelled and reflects the growing importance of SRI to the Fund.
Investment Managers must consider ESG and SRI issues when investing and reporting to the Fund. One way in which the Fund intends to increase the focus on this is to use one of the bi-annual training seminars to focus on SRI and scrutinise managers on engagement and their consideration of the Fund’s policies.
The Camden Pensions Sub-Committee is one of the most transparent, discussing these issues in a public forum and publishes a very full Annual Report. All Councillors are welcome to attend Pensions Sub-Committees and indeed this invite is extended to admitted bodies, unions and retired members representatives (who have all attended in the past). The Fund has recently reviewed its online presence and full details of the Fund’s activities can be found on a dedicated Pension Fund website (http://www.camden.gov.uk/ccm/navigation/council-and-democracy/publications-and-finances/pensions/).