No apologies were received.

Members are asked to declare any interests in matters appearing on the agenda.

No declarations of interest were made.

To approve the minutes of the meeting of 17 November 2009.

The minutes of the Pension Fund Committee held on 17 November 2009 were received and approved and the Chairman was authorised to sign them as a correct record.

The Chair sought and received permission from the Committee to take items 4A and 4B together.  The discussion is detailed in minute 4B.

RESOLVED:

That the fund managers’ activities be noted. 

The Chair requested and was granted the permission of the Committee to consider reports 4A and 4B together.  The purpose of the reports was to report performance, investment activity and the latest portfolio valuation and to note the fund managers’ quarterly reports, approve the proposed investment policies and agree the funds’ overall approach to asset allocation.

Mark Fulwood, Client Director and Alastair Sayer, Investment Director, Multi-Strategy Equities at Henderson Global Investors presented to the Committee the performance review report.  The presentation contained the following points:

• Global Market Review
  
  
• Fund Profile

• • The main account was composed of 82% Equities, 18% Bonds/Cash to the value of £164,910,479
  • Number two account was composed of UK Property and Corporate bonds to the value of £13,749,778
    
    
• Richmond Portfolio Performance
  
  
  • The Portfolio had performed strongly both on an absolute and a relative basis
  • The equity process had delivered positive relative returns due to the continued normalisation of the equity market.
  •  Fixed income performance had continued to perform ahead of benchmark.
    
    
• Summary and Outlook

The Committee discussed the following themes:

• The difference between active and passive investment and the split in such investments of the Henderson Profile.
  
  
• Fees for Henderson and value for money
  
  
• Property holdings in the Portfolio were still 3% underweight and the committee had previously decided to bring the figure back up to 10%.  However the market was currently experiencing heavy fluctuations and those that continued to buy were overpaying in light of the start of a recovery.  It was considered that banks may begin to enforce sales soon and this would again create a drop in prices.  It was suggested that a drip drip method be employed to continue investment in property at a slower rate in order to best take advantage of the fluctuations that may continue to occur in the market.
  
  

It was RESOLVED:

1.                  That the pursuit of the 10% benchmark in property be maintained with a recommended investment of around 1.5m per month

2.                  That Finance Officers in consultation with Fund managers be authorised to invest these sums when appropriate.

3.                  That the report be noted

4.                  That the Fund Managers be congratulated on performance for the last year.

The Committee considered a report of the Director of Finance and Corporate Services the purpose of which was to update the Committee in the recently published LGPS Investment Regulations (effective from 1 Aril 2010) and in light of these to agree a separate treasury policy approach for the fund.

The Committee heard that the biggest practical change would be that the Fund would now have a separate bank account but would continue to be managed in the same way as the larger Fund.  It would mean that the investment limit would now be lower as it would reflect a proportion of the new separate fund; this would make cash management simpler.

There would be some resource issues in that it would require some extra officer time to administrate but would not require any additional posts, should the committee accept the proposals within the report. 

The full details of the approach were laid out as follows:

·         From 1 April 2010, all “investments” of Pension Fund money (of whatever nature) would be nominated to the Pension Fund, which would bear all counterparty risk associated with the investment.

·         It was envisaged that initially, investment would be via one or more interest-bearing deposit accounts, on an immediate notice basis to maximise liquidity; however, term deposits and the use of money market funds would be additional possibilities.

·         Prior to any physical separation of Pension Fund money within a separate bank account, any cash balance held in “non-fund” bank accounts that was attributable to the fund, in excess of the aggregate of nominated Pension Fund investments, would be deemed to be sundry cash held by the Council on behalf of the fund* and would not attract interest.  For this reason it was recognised that this balance should be kept to the minimum practicable level.  Should the cash balance attributable to the Pension Fund be lower than the aggregate of nominated Pension Fund investments, the balance will be deemed to be money borrowed from the Council by the Pension Fund, and would attract interest at the average 7-day rate for relevant period.

·         In terms of all relevant practices, counterparty criteria etc, treasury management and investment activity undertaken by the Council on behalf of the Pension Fund would be carried out on a basis identical to that on which the Council carries out its own treasury management activity; wherever relevant, therefore, the Council’s own Treasury Management Policy and Strategy (as updated) would apply.
 

·         The exception to the above is that no investment with an approved counterparty made on behalf of the Pension Fund will exceed £5m, irrespective of the limit applying to the Council’s investment with the same counterparty.

·         In making investments, however, the Pension Fund would employ counterparty exposure limits that were separate and additional to the Council’s in each case i.e. such that an investment undertaken on behalf of the Pension Fund will not reduce the amount that the Council can invest with the same counterparty.

* Under the basic Regulations, the status of any pension fund cash after 1 April 2010 which is not the subject of a nominated investment is not made explicit.  It is possible that this is the kind of detail that would be covered in the “bank account guidance”, but in the meantime a situation where the Council is regarded as “custodian” as opposed to “borrower” is assumed.

** The Council’s draft revised Treasury Management Policy and Strategy are due to be approved at Cabinet on 22 February 2010.  Where they are referred to in the report it is on the assumption that they will have been approved and adopted by the time of the Pension Fund Committee on 1 March 2010 [This was the case].

It was RESOLVED:

1.                  That the principal changes to the LGPS Investment Regulations effective from 1 April 2010 be noted.

2.                  That the adoption of the Pension Fund Treasury Policy as set out in the report be agreed and adopted.

The Committee considered a report of the Director of Finance and Corporate Services the purpose of which was to inform the Committee of the proposed arrangements for the review of the statutory content of the 2009/10 Pension Fund Annual Report.

The Committee discussed the impact of the recent requirement to revise and expand the content of the Statement of Investment Principles arising from the new LGPS Investment Regulations on its ability to approve all of the Statutory content of the Pension Fund Annual Report.

It was RESOLVED:

1.                  That the revision of all of the following statements;

·         Funding Strategy Statement;

·         Governance Compliance Statement;

·         Policy on Communication with Members;

·         Statement of Investment Principles;

be deferred until the next meeting of the Committee to be held on 24 June 2010.

2.                  That the 2010/11 PFAR be approved at the February meeting as was previously the case.

The Committee considered a report of the Director of Finace and Corporate Services, the purpose of which was to inform the Committee of the proposed timetable for the 2010 Fund Valuation and any associated issues.

The Committee heard that the purpose of the valuation was:

·         to measure the “solvency” of the fund i.e. whether, in the actuary’s opinion, the current fund is sufficient to meet pension liabilities accrued to date;

• to set appropriate contribution rates required to fund future service accruals and to recover any funding deficit, over a specified period.

In order to project cash flows it was necessary to make assumptions about certain areas, these were; pay increases, Inflation and Longevity of payments to be made.

It was RESOLVED

1.                  That the proposed timetable for the 2010 Fund Valuation be noted;

2.                  That the information contained within the report be noted.

The Committee considered a report of the Director of Finance and Corporate Services the purpose of which was to describe the current position on various governance matters and to consider the proposed programme of reports to the Pension Fund Committee.

It was RESOLVED:

1.                  That ‘allocation responsibilities’ be included as part of the governance matters discussed within the report.

2.                  That with the addition of 1. the governance matters the current position and proposed timetable detailed as detailed in the report be noted.

3.                  That there would be an annual discussion of the strategy at the November meetings of the Committee as of November 2010.