INVESTMENT STRATEGY
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Leyland Otter, Investments |
The Fund is managed within the rules and guidelines set out in the 1998 Regulations (which consolidated and simplified previous regulations). These regulations set parameters for the types and limits that the Fund can invest in certain asset classes.
The investment strategy of the Fund has been to maximise returns over the medium to long-term, whilst having regard to its liability commitments and the risks entailed. This has led to a more bespoke structure, better suited to matching the Fund’s maturity and liability profile. The requirement to maintain a balanced portfolio of assets across a diversified portfolio, invested in a range of stocks and sectors, remains of paramount importance. At the 2006/07 year end, the asset/liability relationship was reviewed by Mercer HR Consulting and the recommendations have been implemented. Further information is contained in the Fund’s Funding Strategy Statement (FSS).
Responsible Investment
Merseyside Pension Fund became a signatory to the United Nations Principles of Responsible Investment (UNPRI) in 2007. This has since been the underpinning of the Fund’s responsible investment policy.
In summary, the Principles encapsulate the belief that, over the long term, active consideration of environmental, social and governance issues will enhance the value of investments. This means incorporating these issues into investment analysis and decision making, acting as a responsible owner of the companies in which we invest and collaborating with like-minded investors on issues of shared concern. We are required to report annually to the PRI Secretariat on our progress in applying the Principles – we await the feedback to our 2009 report.
PIRC Ltd is the Fund’s corporate governance adviser and provides research, analysis and voting recommendations that cover all holdings in the UK and overseas equity portfolios. The Fund has adopted, as its voting policy, the PIRC Global Shareholder Voting Guidelines and, as of July 2008, responsibility for executing the voting was transferred to PIRC.
The Legal & General UK Equity Index Fund is mandated to vote on our portion of the underlying shares, according to the voting recommendations received from PIRC. The table below shows data from 12 months of voting, as executed by PIRC.
| Voting Activity - July 2008 to June 2009 | |||||
| UK | Europe | Japan | Rest of World1 | USA2 | |
| Number of meetings (AGM/EGM) voted at during year | 123 | 175 | 106 | 378 | 650 |
| Number of meetings where we voted to oppose or abstain on 1 or more resolution | 97 | 142 | 86 | 330 | |
| % of all resolutions voted oppose or abstain | 19 | 30 | 14 | 35 | 11 |
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1Includes developed Asia-Pacific sector, global emerging markets (Asia, EMEA & Latin America) and Canada.
2Not included in PIRC’s global coverage as the Fund’s US equity portfolio is comprised of pooled fund managed by UBS Asset Management, who vote on all the underlying holdings according to their own best practice guidelines on corporate governance. UBS regularly report this voting activity to the Fund.
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| Management Resolution | For | % | Abstain | % | Oppose | % | Total |
| Receive Annual Report | 77 | 44 | 27 | 15 | 71 | 41 | 175 |
| Elect Directors | 386 | 87 | 28 | 6 | 32 | 7 | 446 |
| Executive Pay Schemes | 11 | 31 | 6 | 17 | 18 | 52 | 35 |
| Auditors | 95 | 66 | 37 | 25 | 13 | 9 | 145 |
| Corporate Donations | 31 | 79 | 5 | 13 | 3 | 8 | 39 |
| Share Issue/Re-purchase | 262 | 95 | 12 | 4 | 2 | 1 | 276 |
Engagement and Collaboration
Active involvement in the work of the Local Authority Pension Fund Forum (LAPFF) and the Institutional Investors Group on Climate Change (IIGCC) is fundamental to pursuing the Fund’s engagement policy. Engagement is an important part of responsible investing as it involves not just evaluating companies’ responsible business practices, but also actively facilitating their improvement. LAPFF has a wide-ranging engagement work-plan, covering an assortment of corporate governance and corporate social responsibility issues, which over the past year has included a response to the financial crisis, involving engagement with UK banks and policy-makers.
Climate change is arguably the most important issue investors face over the long-term and IIGCC seeks to drive the debate on adaptation and mitigation. It has published, over the past year, influential policy papers on enhancing the effectiveness of carbon markets and developing financing mechanisms to encourage investment flows into renewable energy.
