ITEM PF3PENSION FUND COMMITTEEMINUTES of the meeting held on 25 August 2006 commencing at 10.15 am and finishing at 16.05 pm. Present:
Voting Members: Councillor
Bill Bradshaw District
Council Representatives: Officers: Whole
of meeting: Mr K Bell, Mrs S Fox and Mr T Wheeler (Resources);
Ms M Holyman (Chief Executive’s Office) The Committee considered the matters, reports and recommendations contained or referred to in the agenda for the meeting, together with a revised booklet from the WM Company, a page relating to the Hedge Fund portfolio from UBS and a proposed programme for the annual pension forum tabled at the meeting, and decided as set out below. Except insofar as otherwise specified, the reasons for the decisions are contained in the agenda, reports and additional documents, copies of which are attached to the signed Minutes.
37/06. APOLOGIES FOR ABSENCE AND TEMPORARY APPOINTMENTSApologies for absence and temporary appointments were received as follows:
38/06. DECLARATIONS OF INTERESTCouncillors Bradshaw, Moley, Nimmo-Smith and Rose declared personal interests as members of the Pension Fund Scheme under the provisions of Section 18 of the Local Government and Housing Act 1989. Councillor Moley declared a personal and prejudicial interest in Agenda Item 19 (Local Government Pension Scheme Regulations – Application for Admission as a Transferee Admission Body) as a member of the Vale of White Horse District Council. 39/06. MINUTESThe Minutes of the meeting of the Committee held on 26 May 2006 were approved and signed. 40/06. OVERVIEW OF PAST AND CURRENT INVESTMENT POSITION(Agenda Item 5) The Committee was advised that Tables 1 to 7 had been compiled from the custodian's records (the Pension Fund's prime record keeper). In his records, he accrued for dividends and recoverable overseas tax within his valuation figures and might also have used different exchange rates and pricing sources compared with the fund managers. In addition the Committee was advised that the custodian had treated dividend scrip issues as purchases which the fund managers might not have done. This might mean that there were minor differences between the tabled figures and those which had been supplied by the managers. The Independent Financial Adviser reviewed the investment activity during the past quarter and presented an overview of the Fund’s position as at 30 June 2006. He reported that the value of the portfolio had fallen by 2% compared with the previous quarter. The value of equities (including private equity) had fallen but the value of bonds, the other alternative investments and the Tactical Asset Allocation Fund had increased. He pointed out that the value of the Tactical Asset Allocation Fund should read "£31,345,000" and not "£31,645,000" as stated in Table 1. On Table 2, UK and overseas equities and bonds were in line with the benchmark, North American equities and cash were above the benchmark and Asia Pacific equities and Property were below the benchmark. On Table 3, UK equities were above the benchmark. Overseas equities overall were below the benchmark: in particular North American equities were well below the benchmark but Emerging Markets were well above the benchmark although the latter was in part offset by Asia Pacific. On Table 4, Legal and General was below the benchmark for Corporate Bonds but over the benchmark for Overseas Bonds and Baillie Gifford was virtually fully invested. On Table 5, he highlighted that there had been net sales of £2.4m of UK equities and sales of £0.6m of private equity and purchases of £2m of property. The market value of UK equities and overseas equities had fallen over the quarter by £15m and £14.5m respectively but the value of bonds had increased. He also reported that the change in the market value of the Tactical Asset Allocation Fund should read "2,626,000" and not "2,926,000" and the grand total of the market value should read "£935,904,000" and not "£937,204,000". On Table 6, the figure in the column headed "Unrealised gain/loss", line "Total of all Investments" should read "£11,311,078". On Table 7, he highlighted that there had been purchases of Oxford Technology 4 Venture Capital Trust and sales of Schroder private equity and Candover. On Table 8, he reported that, over the last quarter, UK, overseas and private equities and hedge funds had all underperformed and the performance of bonds and property were in line with the benchmark but pointed out that the performance needed to be viewed over the 3-year rolling programme. He also reported that for the Quarter ended 30 June 2006, Oxfordshire Total Fund, the figure for the Total Fund should read "-2.8". On Table 9, he reported that for the Twelve Months ended 30 June 2006, Oxfordshire Total Fund, the figure for Overseas equities should read "16.6" and not "17.3". He highlighted that UBS had underperformed against the benchmark. On Table 10, he highlighted that Alliance Bernstein had outperformed the benchmark, Baillie Gifford had underperformed over the last quarter but was slightly over the benchmark for the twelve month period and Legal & General’s performance was in line with the benchmark. RESOLVED: to receive the tables, and that the information contained in them be borne in mind, insofar as they relate to items 8E, 9E and 10E on the agenda. 41/06. EXEMPT ITEMSRESOLVED: that the public be excluded for the duration of the items 6E-11E in the Agenda since it was likely that if they were present during those items there would be disclosure of exempt information as defined in Part I of Schedule 12A to the Local Government Act 1972 (as amended) and specified in relation to the respective items in the Agenda and since it was considered that, in all the circumstances of each case, the public interest in maintaining the exemption outweighed the public interest in disclosing the information. 42/06. WM COMPANY PRESENTATION ON THE PENSION FUND'S INVESTMENT PERFORMANCE FOR THE TWELVE MONTHS ENDED 31 MARCH 2006*(Agenda Item 6E) The Committee considered the Annual Performance Review produced by the WM Company and received a presentation from Ms Thrumble. A revised booklet was tabled (copy attached to the signed copy of the minutes). Ms Thrumble reported orally to the Committee on the investment performance of each of the four companies’ individual portfolios of the Pension Fund for the twelve-months’ period ended 31 March 2006 and highlighted where the fund managers had over/underperformed against the Fund’s own customised benchmark and against the WM Local Authority Pension Fund Universe. She said that overall Oxfordshire's fund had performed well over the period and the fund was performing in line with actuarial predictions. It was well diversified in terms of its managers and assets. The fund was just outside the top third performing local authority pension funds for the 3-year period. She highlighted that the Oxfordshire Pension Fund held a higher proportion of alternative investments than many other local authority pension funds; these investments had performed well. The high level of cash held had put a drag on performance when equities had been performing well. However, this was typically the position for most other local authority pension funds. UBS had underperformed and Alliance Bernstein had outperformed against their benchmarks and Baillie Gifford had performed slightly above its benchmark for the period. Legal & General’s performance was in line with its benchmark. Private equities and hedge funds had outperformed their benchmarks. RESOLVED: to thank Ms Thrumble for her presentation and to receive the report. 43/06. OVERVIEW AND OUTLOOK FOR INVESTMENT MARKETS*(Agenda Item 7E) The Committee considered a report (PF7E) which set out an overview of the current and future investment scene and market developments across various regions and sectors. The Independent Financial Adviser reported orally on the main issues in his report. RESOLVED: to receive the report and tables, to receive the oral report, and to bear the Independent Financial Adviser’s conclusions in mind when considering the Fund Managers’ reports.
44/06. PORT OF MAIN ISSUES ARISING FROM REPORTS OF THE FUND MANAGERS NOT REPRESENTED AT THIS MEETING*(Agenda Item 8E) The Independent Financial Adviser reported that Alliance Bernstein had performed well both in the short- and long-term. He said that he had nothing to report on the performance of Legal & General. RESOLVED: to note the main issues arising from the reports. 45/06. UBS GLOBAL ASSET MANAGEMENT*(Agenda Item 9E) RESOLVED: to receive UBS’s quarterly and presentation reports for the quarter ending 30 June 2006 and to note the main issues arising from the presentation. 46/06. BAILLIE GIFFORD*(Agenda Item 10E) The representatives (Mr I McCombie and Mr L Robb) of the Fund Manager reported and reviewed the present investments of their part of the Fund and their strategy against the background of the current investment scene for the period which ended on 30 June 2006. RESOLVED: to receive Baillie Gifford’s quarterly and presentation reports for the quarter ending 30 June 2006 and to note the main issues arising from the presentation. 47/06. SUMMARY BY THE INDEPENDENT FINANCIAL ADVISER*(Agenda Item 11E) The Independent Financial Adviser said that he had nothing further to add to the comments he had made earlier in the meeting.
ITEMS FOLLOWING THE RE-ADMISSION
OF THE PRESS AND PUBLIC
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