No apologies for absence were received.

To receive declarations of interest, from Committee members, in matters appearing on the agenda.

No declarations of interest were made.

To seek approval of the minutes if the meeting held on 27 February 2012.

The minutes of the last meeting were agreed as a correct record and the Chairman authorised to sign them, subject to the following amendment

A new staff observer Mike Potts had been appointed but the announcement had been omitted in error.

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 report performance, investment activity and the latest portfolio valuation.

William Marshall, Investment Consultant for Hymans was in attendance to speak to the item and he referred in particular to the following information:

(i)      Market and background information within which context the committee would be assessing the Fund’s performance.

(ii)    Returns for Henderson were above index owing to the tail end of enhanced tracking methods that would no longer be used once the account had transferred to a fully passive brief.

(iii)   L&G had marginally underperformed against benchmark.

(iv)  The quarter had been reactively successful for the other fund Managers.

(v)    The quarter had been relatively successful for the property fund managers.

The Committee discussed the information received in the presentation and that contained within the report and was satisfied that no further information was required.

It was RESOLVED that the report be NOTED.

To note the fund managers’ quarterly reports, seek approval of the proposed investment policies and agreement of the fund’s overall approach to asset allocation.  (Commentaries and presentations to be given by William Marshall, Hymans Robertson and Mark Fulwood and David Elms, Henderson Global Investors.)

The Committee received a report of the Director of Finance and Corporate Services, the purpose of which was to provide the Fund Managers’ quarterly reports for consideration, seek approval of the proposed investment policies and the fund’s overall approach to asset allocation.

Mark Fulwood, Client Director and David Elms, Head of Multi-Strategy Equities, of Henderson Global Investors were in attendance to speak to the report, as was LBRuT Senior Accountant (Pensions).

The Henderson representatives addressed the Committee, providing a presentation that referred in particular to the following:

(i)      That in line with the changes to fund management approach within Henderson, reported at the last Committee, the equity vehicles covering the US, Japanese and Pacific markets were now fully passive in terms of current activity, but that a legacy of the former overlay strategies remained.

(ii)    That the value of both the main fund and the secondary account had increased in the first quarter of 2012.

(iii)   That the portfolio remained overweight in equities but that this had been beneficial in the light of recent market activity that had seen this asset class perform well.

(iv)  That all four of the fund management techniques used by Henderson had performed strongly this quarter.

In response to questions raised and comments made the Committee heard the following further information from the Henderson representatives:

(i)      That the outperformance could be largely attributed to the opportunities that had arisen in Europe, where for the liquidity strategy, for example, current low confidence meant that long-term investors could buy relatively reliable stock at low prices.  However, the Committee should note that in the regions where the funds had returned to passive these gains were the tail-end of the enhanced strategies and that further gains such as these were unlikely.

(ii)    That the relevant funds would continue to transition to 100% passive management over the next quarter and would be in this position by quarter 3 of the year.

The Committee discussed the information received and that contained in the report but no further questions were asked.

It was RESOLVED that:

1. The quarterly reports of L&G and Henderson be NOTED.
   
   
2. That Henderson’s and L&G’s investment policies be APPROVED.
   
   
3. That the current asset allocation be AGREED.

To inform the Committee of Schroder’s proposal to convert SEPUT from a Property Unit Trust to Property Authorised Investment Fund (“PAIF”) and to seek agreement to a provisional position with regard to voting on the conversion.

The Committee received a report of the Director of Finance and Corporate Services the purpose of which was to detail for consideration the proposal from Schroders that SEPUT be converted from a Property Unit Trust to a Property Authorised Investment Fund (PAIF). 

LBRuT’s Senior Accountant (Pensions) introduced the report to the Committee and detailed the relevant points for consideration.  These were:

(i)      That Schroders had announced their intention to convert the trust to a PAIF.

(ii)    The principal objectives of this move were to broaden the potential investor base, to allow automatic re-investment of income and also the issue of gross income to investors (i.e. removing the need to reclaim income tax withheld).

(iii)   Officers advised that the proposed change was unlikely to affect  the investment return of the fund.

The report therefore sought the Committee’s delegated authority to vote for the changes at a fund EGM due to be held on 16 July.

It was RESOLVED that

1. That the proposal to convert the fund top a PAIF be supported.

2. That authority be delegated to officers to vote for the proposal when asked.
   
   

That the information in the report be NOTED.

To receive an 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 the purpose of which was to update the Committee on the search for a Diversified Growth Fund Manager.

The LBRuT Senior Accountant (Pensions) spoke to the item.  He reported that the successful Fund Manager had been chosen.  However, final documentation was being drafted and approved therefore the process was not yet complete.  This would be completed shortly, when subsequently the successful manager would be appointed and the Committee further informed.

On receipt of a question regarding the joint appointment process with Sutton, it was reported that although the process had been slower and more difficult than had originally been envisaged, the arrangement had paved the way for future ventures to be conducted much more easily.

It was RESOLVED that the report be NOTED.

To consider and seek approval of the Annual Audit Plan 2011/12. (Paul Grady and Paul Jacklin from the Audit Commission will be in attendance to present the plan.)

The Committee received a report of the Director of Finance and Corporate Services the purpose of which was to allow consideration of the Annual Audit Plan for 2011/12. 

The Senior Accountant (Pensions) LBRuT and the District Auditor (Audit Commission) were in attendance to talk to the report and they drew the attention of the Committee to the following information:

(i)      The Audit Plan satisfied the statutory requirement to report certain information to those charged with Governance.

(ii)    This information included the risks identified by the External Audit team.  These were:

·         The nature of the Legal & General investment and the associated risk that the valuation could be misstated.

·         The establishment of a separate bank account for the Pension Fund, which although now active, remained a risk until it was clear that all pension fund monies were separated from the main cash balances.

·         The upgrade to the general ledger software and the associated migration of data. 

(iii)   Overall, the Audit had identified low risk associated with London Borough of Richmond and therefore the fee remained relatively low in comparison to other Council Audits, at £30,500.

(iv)  Key milestones and deadlines were reported.  The fee was no longer calculated on the number of days put into the Audit but on the outputs expected and was felt to therefore represent better value for money.  In addition, should the Audit require more days than the team estimated the fee would not alter.

In response to a question from a Committee member Mr Grady confirmed that it would be difficult for Richmond to improve its reporting enough to reduce fees further as it was already of the highest standard.

Mr Grady confirmed that the Audit opinion would be given in September.

It was RESOLVED that the report be NOTED.

To include a short training session for members on one topic within the knowledge and skills framework.

The Committee received a report of the Director of Finance and Corporate Services reporting the previous decision of the Committee to include training reports within the agenda of future meetings.

This report satisfied that request and William Marshall of Hymans made a presentation to the Committee regarding theory and practice of actuarial methods, standards and practices, one of the subjects highlighted by the CIPFA guidance suggesting training topics for members.

Members thanked Mr Marshall for the informative presentation.

It was RESOLVED that the report be NOTED.

The Committee received a report of the Director of Finance and Corporate Services providing information on the latest developments regarding the reform of the Local Government Pension Scheme (LGPS).

LBRuT’s Senior Accountant (Pensions) introduced the report to the Committee and reported that:

(i)      That there was some agreement between those involved in negotiations as to the shape of the outline scheme and the proposals for change.

(ii)    That the scheme was likely to reflect the findings and recommendations of the Hutton report; key changes being the introduction of career average benefit calculations and linking of retirement age to that of the state pension.  In addition, it was proposed that there would be no increase in contribution rates for the majority of members and a “50-50” membership option for members that were experiencing financial difficulties, to encourage the upkeep of pensions.

It was RESOLVED

1. That a further report be received when developments occur.

2. That the information in the report be NOTED.