No apologies were received.

To declare any Committee members’ interests in matters appearing on the agenda.

No declarations of interest were received.

To approve the minutes of the meeting held on 21 June 2011.

The minutes of the last meeting of the Pension Fund Committee held on 21^st June 2011 were agreed as a correct record and the chairman authorised to sign them.

To report performance, investment activity and the latest portfolio valuation.

The Committee received a report of the Director of Finance and Corporate Services, the purpose of which was to provide information to the Committee on the performance and investment activity of the fund managers and to provide the latest portfolio valuation.

The LBRuT Senior Accountant with responsibility for pensions introduced the report for the Committee and briefly described the performance of each manager, referring in particular the following points:

(i)      Henderson had recorded a below index overall return owing to marginal underperformance in some of the more significant equity categories.

(ii)    That L&G had performed in line with the benchmark, with only minor deviations from the index in smaller equity categories.

(iii)   That the fund’s largest single property holding (the Schroder Exempt Property Unit Trust or “SEPUT”) continued to perform well, with the remaining property investments having underperformed.

In response to comments and questions from the Committee officers made the following points:

(i)      That Henderson’s underperformance was within expected parameters, and the fee structure ensured approximate parity of cost with fully passive management for performance around index level.

(ii)    That although the performance fees were chargeable on the basis of (calendar) year-end valuation, the inherent nature of the investment approach and calculation basis ensured that this should be representative of any benefit accruing to the fund over the whole year.

(iii)   That Henderson would be in attendance at the next meeting of the Committee.

It was RESOLVED:

That the information contained within the report be noted.

To note the fund managers’ quarterly reports, approve the proposed investment policies and agree the fund’s overall approach to asset allocation.  (Commentary on market background and general issues of relevance to be given by William Marshall, Hymans Robertson.)

The Committee received a report of the Director of Finance and Corporate Services the purpose of which was to provide the Committee with the fund managers’ quarterly reports and seek approval of the proposed investment policies and approach to asset allocation.

The LBRuT Senior Accountant with responsibility for pensions introduced the report to the Committee.  Also in attendance was William Marshall of the fund’s investment advisors, Hymans Robertson, who presented some printed slides covering market background and asset allocation.  In particular, they referred the Committee to the following:

(i)      Data on recent performance for the main asset classes in which the fund was invested including bond markets (with passing reference to the impact of long-term yields on the fund’s liabilities.

(ii)    In the fund’s current allocation, cash was the furthest from the central benchmark weighting, being 1.3% overweight (which equated to a value of around £5-6m.  It was suggested to the Committee that a value equivalent to the cash overweight be invested via L&G in equities and bonds (according to the normal benchmark distribution for that mandate).

The Committee expressed a desire also to invest further in property (also marginally under its benchmark weighting).  After some discussion, officers suggested that £5m be invested with L&G as proposed and £1m be invested in property, potentially via the SEPUT holding.

It was RESOLVED:

1.           That £1m of the fund’s cash allocation be invested in property, potentially  via SEPUT (depending on availability of units in the secondary market).

2.          That £5 million of the fund’s cash allocation be invested in the L&G portfolio at the next available unit dealing day on 3 October.

3.          That at the next meeting of the Committee the cash element of the fund be reviewed again.

4.          That the quarterly reports of Henderson and L&G be noted

5.          That the investment policies of L&G and Henderson be approved.

6.          That the fund’s asset allocation be agreed, subject to the resolutions at 1. and 2.

To update on the progress of the search for a Diversified Growth Fund manager.

The Committee received a report of the Director of Finance and Corporate Services which provided an update on the search for a Diversified Growth Fund Manager as agreed at the last meeting of the Committee.

The LBRuT Senior Accountant with responsibility for pensions introduced the report to the Committee and in particular referred to the following information:

(i)      That Richmond and Sutton were collaborating on a joint search in order to make efficiency savings, utilising a “framework” approach (under which a panel of potential providers are selected, any of which can be subsequently be appointed within a specified period, in this case 4 years).

(ii)    That the first stage of the search was now complete and that subject to approval by Sutton, a shortlist of 12 managers would proceed to the next stage, termed Request for Proposal (“RfP”).

(iii)   Around 6-8 managers from the RfP stage would be interviewed by officers with a view to being appointed to the framework (these interviews are scheduled to take place in December of this year).

(iv)  Around 4-5 managers would be appointed to the framework, at which point they could be invited to address the Committee, if required.

(v)    Once at the Committee / final appointment stage, the process would separate from Sutton.  There would not be any shared service provision.

It was RESOLVED:

1.                            That the progress towards the appointment of a Diversified Growth Fund Manager be noted.

To consider the ISA 260 report prepared by the Auditor in relation to the 2010/11 Pension Fund accounts, prior to the issue of the Auditors’ Opinion.

[Councillor Martin was not present for this item]

The Committee received a report of the Director of Finance and Corporate Resources containing as an appendix the Annual Governance Report prepared by the Auditor in relation to the 2010/11 Pension Fund accounts, prior to the issue of the Auditors’ opinion.

The Head of Capital Finance introduced the report to the Committee and explained that unlike in previous years, this year the Statement of Accounts had already been signed off by the Director of Finance.  She reported that Officers were happy with the findings of the Audit Commission.

Lindsay Mallors of the Audit Commission reported to the Committee that an unqualified opinion would be given by the Commission and that there were no material errors within the accounts.  She thanked officers at Richmond for their help and co-operation.  She referred the Committee to some minor errors of detail within the statements that were not of concern but were included for completeness. 

It was RESOLVED:

1.                    That Letter of Representation be approved for signing.

2.                    That the action plan be agreed and progressed.

To approve the 2010/11 Pension Fund Accounts and Pension Fund Annual Report (including any additional amendments to the statutory content of the Annual Report).

[Councillor Martin was not present for this item]

The Committee received a report of the Director of Finance and Corporate Resources which sought approval of the 2010/11 Pension Fund Accounts and Pension Fund Annual Report. 

The Head of Capital Finance introduced the report to the Committee and explained that owing to a change in the legislation relating to the sign off of these accounts the Director of Finance and Corporate Resources had completed this task on 30 June along with the Council’s other accounts.  She explained that the next step should be that the Committee approve the accounts and to include them in the Pension Fund Annual Report.  Minor amendments had been made to the Report, and circulated to Members prior to the meeting.  The Annual Report had already been agreed by the external auditors subject to the inclusion of the accounts, so approve was also sought for publication of the Annual Report.

In response to a question from the Committee heard that:

(i)      That in accordance with advice on best practice received the funding policy had been changed to reflect the need to ensure continued affordability of the scheme to employers.

It was RESOLVED:

1.                  That the Accounts of the Pension Fund for the financial year 2010/11 be approved.

2.                  That the Pension Fund Annual report for the financial year 2010/11 be approved.

To inform the Committee of ongoing workstreams relating to the administration of the Pension Fund.

Reports of the Director of Finance and Corporate Services attached.

The Committee received a report of the Director of Finance and Corporate Services the purpose of which was provide the Committee with information pertaining to the ongoing work streams related to the administration of the Pension Fund.

The Assistant Director of Finance spoke to the report.  In particular he referred the Committee to the following information:

(i)      A review of admission arrangements was underway and it was intended that model agreement from the Berkshire Pension Fund would be adopted in the future.  He requested that the approval of the final agreement document for Richmond be delegated by the Committee to the Director of Finance and Corporate Services.

(ii)    That the newly created academies in the Borough had Scheduled Body Status and as such were not obliged to enter a formal admission agreement, although they would be encouraged to do so.  Where this request was declined LBRuT intended to agree a document which outlined the rights and responsibilities of the organisation under the Pension Fund Regulations.

(iii)   That work was being undertaken to review the pooled basis of the contribution rates charged across the entire fund and a full report would be brought before the Committee at the next meeting.

It was RESOLVED

1.                          That responsibility for the final approval of the Admission arrangements document be delegated to the Director of Finance and Corporate Services.

2.                          That the information in the report be noted.