No apologies for absence were received.

In accordance with the Members’ Code of Conduct, Members are requested to declare any interests orally at the start of the meeting and again immediately before consideration of the matter. Members are reminded to specify the agenda item number to which it refers and the nature of the interest being declared.

No declarations of interest were made.

To approve the minutes of the meeting held on 11 September 2012 – Attached.

The minutes of the meeting held on 11 September 2012 were agreed as an accurate record and the Chairman authorised to sign them.

The Committee agreed that the order of business be rearranged to take the Fund Managers’ Quarterly Reports and Fund Asset Allocation as the first substantive item on the agenda.

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.

The Committee heard that the total Fund performance was in line with the benchmark and the early return figures for the recently-funded Pooled Multi-Asset mandate with Baillie Gifford were highlighted.

The Committee was also shown a piece of comparative work completed by PricewaterhouseCoopers on London boroughs’ pension fund performance over 10 years to 31 March 2011.  The data showed that Richmond placed fourth of 28 boroughs.

It was RESOLVED that 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 and presentation to be given by William Marshall, Hymans Robertson and Mark Fulwood and Alistair Sayer, 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.

William Marshall, Investment Consultant and Albert Chen, Investment Analyst, were in attendance on behalf of the Fund’s investment advisors, Hymans Robertson, to provide a market update.

Although the general sentiment of the economic outlook was not ideal, it had shown stabilisation and steadied since the middle of the year.  The Eurozone had a low, and falling, Manufacturing PMI score.  Boosting markets has had a positive effect on equities and corporate bond markets.  The RPI was in line with the CPI i.e. it was falling and, although Japan was struggling in Q3, the remaining global returns were satisfactory.

The 3-month LIBOR-OIS spread was very wide, reflecting the banking crisis.  Government bond yields remained low but were trading in range while some Eurozone bonds fell during the last period.  Ireland appeared to be recovering.  Property growth through income has slowed with some falls in capital value.  There was, however, political will to keep the markets going despite lots of uncertainty.

Mark Fulwood, Client Director, and Alistair Sayer, Investment Director, International Equities, of Henderson Global Investors, were in attendance to speak to their report.

Henderson now had a significant proportion of fully passive equity in the portfolio in addition to the remaining enhanced index funds (UK and Europe), whilst gilts and corporate bonds were actively managed.  Of the passive funds, the Global Emerging Markets sector (based on less full replication than other regions) had underperformed the index in Q3.

The Committee noted that HGI’s multi-asset portfolio was broadly in line with benchmark in the quarter ending 30 September 2012, had outperformed by 0.7% at the one year mark and had performed above benchmark since 2006.  The enhanced index vehicles carry slightly higher risk than passive: 66% of the time, the return should be within 1.5% of the benchmark assuming a normal distribution.

Three of the four enhanced index equity strategies added value in the quarter ending 30 September 2012.  Liquidity was classified as neutral and the strongest category was relative value.  The defensive stance of the portfolio had proved positive and had outperformed the benchmark except in Q3.

Gilts yields had fallen significantly over the last 10 years, as many investors have preferred to purchase government bonds relative to other asset classes.  UK inflation was above the 2% target rate however this might continue in the light of the economic difficulties, assuming the maintenance of the current monetary policy.  The Committee discussed the long-term situation on Government bonds and the actions of the Bank of England.

Henderson described a new internal monitoring process that would be rolled out incorporating a detailed quarterly review of performance across the portfolios it managed.

Recent, broadly favourable developments regarding the company’s infrastructure funds, that had been the subject of legal action, were  ...  view the full minutes text for item 24.

To agree a revised set of asset allocation ranges and approach to Fund re-balancing following the inception of the Diversified Growth Fund mandate with Baillie Gifford.

The Committee received a report of the Director of Finance and Corporate Services the purpose of which was to consider a revised set of asset allocation ranges and approach to Fund rebalancing.  The Committee heard that a sensitivity analysis had been completed which indicated that other than in extreme market conditions, the required balance in the new Fund structure should be able to be maintained via a broadly similar approach to that currently practised, ideally by deploying new funds generated by contributions as opposed to re-distributing existing funds under management.

Following questioning from the Committee it was clarified that the recommendation was not to change current rebalancing practice procedure by managers, but to seek to formalise the “failsafe” procedure.

It was RESOLVED that the revised asset allocation ranges and approach to Fund rebalancing be AGREED.

To inform the Committee of the recently issued CLG consultation and agree an appropriate response on behalf of the Fund.

The Committee received a report of the Director of Finance and Corporate Services the purpose of which was to inform the Committee of the Communities and Local Government consultation and to agree an appropriate response on behalf of the Fund.

The contents of the consultation paper were summarised, and it was noted that an increase in the limit from 15% (to 30%) was not relevant to the Fund, as there was headroom at current levels.

The Committee discussed potential responses to the consultation in general terms, commenting that they would prefer a more thoroughgoing (as opposed to ad hoc) review.  There was some support for a wholesale removal of the prescriptive limits in favour of a “risk versus reward analysis” i.e. what is commonly referred to as a “prudential” approach.

It was RESOLVED that:

1.    The contents of the report be NOTED.

2.    That it be AGREED that a response to the CLG consultation be issued by officers to the effect that a segmented approach to the loosening of limits is not considered appropriate; rather that the investment regulations should be reviewed as a whole.

To inform the Committee of the latest developments regarding the revisions to the LGPS scheduled for implementation from April 2014.

The Committee received a report of the Director of Finance and Corporate Services the purpose of which was to inform the Committee of the latest developments regarding the revisions to the Local Government Pension Scheme scheduled for implementation from April 2014.

It had been anticipated that the “main” consultation on the draft regulations would be released by the date of the meeting, however it had not been issued.  It was suggested that the consultation would be brought to the next meeting if still open at that point; otherwise the Committee may be informed prior to then.

It was RESOLVED that the contents of the report be NOTED.

To include a short training session for members on one topic within the Knowledge & Skills Framework.

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

William Marshall of Hymans Robertson made a presentation to the Committee regarding Financial Markets and Product Knowledge.  This covered the advantages and disadvantages of various asset classes and a refresher on equities including “alternative” indices.

It was RESOLVED that the report be NOTED.