Meeting documents

Pension Fund Committee
Friday, 20 February 2004

PF200204-13

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ITEM PF13

PENSION FUND COMMITTEE – 20 FEBRUARY 2004

STOCK LENDING

Report by the Head of Finance and the Independent Financial Adviser

Introduction

  1. In November 2003 the Committee received a joint report from the Head of Finance and the Independent Financial Adviser on stock lending (attached as Annex 1). The report explored the stock lending capabilities of the Fund’s custodian, ABN AMRO Mellon and particularly focussed on how it addressed the areas of risk associated with stock lending.

  2. The report recommended that the Fund should request ABN AMRO Mellon to lend stock on behalf of the Oxfordshire Pension Fund. However, following the extensive changes to the composition of the Fund’s investments it was considered prudent to ask ABN AMRO Mellon to produce a more up to date stock lending fee estimate before deciding whether to proceed.

    3. ABN AMRO Mellon Stock Lending Report

  3. ABN AMRO estimate that based on the composition of the Pension Fund’s assets at 31 December 2003 approximately £321 million of stock is lendable. The average volume of stock lent out at any one time would be approximately £14 million or 2% of the Oxfordshire Total Fund. This is well within the 25 % stock lending limit allowed to local authority pension funds laid down in the Local Government Pension Scheme (Management and Investment of Funds) Regulations 1998.

  4. The estimated gross fee generated on £14 million average lending is £72,500 and based on a split of 60% to the lender and 40% to ABN AMRO Mellon, as agent Oxfordshire’s share would be £43,500 per annum. This figure is substantially higher than the £18,000 reported to the Committee in November 2003.

  5. Stock lending projections can prove to be wide of the mark and there is a tendency for custodians to provide overly optimistic forecasts thus the actual fee that Oxfordshire receives may be lower than the projected figure.

    6. RECOMMENDATIONS

  6. The Committee is RECOMMENDED to request the Pension Fund’s global custodian, ABN AMRO Mellon, to lend stock on behalf of the Oxfordshire Pension Fund:

CHRIS GRAY
Head of Finance

A F BUSHELL
Independent Financial Adviser

Background Papers: Nil

Contact Officer: Tony Wheeler, Directorate for Business Support Tel (01865) 815287

February 2004

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