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ITEM PF15

PENSIONS FUND COMMITTEE – 21 FEBRUARY 2003

UPDATE ON THE APPOINTMENT OF INVESTMENT MANAGERS

Background

1. At the Pension Fund Committee meeting held on 6 November 2002 the Committee agreed the following management structure for the Oxfordshire Pension Fund: -

£145million with one multi-asset manager

£145million with one global equities manager

£105million with one or possibly two UK equities manager(s)

£75million with one Fixed Income manager

£25million with one Property Fund manager

2. The Committee agreed that ‘bfinance’ should be appointed to manage the tendering process and provide the necessary analysis to select a shortlist of fund managers.
3. The Committee asked officers to invite suitably qualified consultants to assist them with the selection and appointment of the fund managers during the final stages of the appointment process.

Progress to Date

4. Officers together with Mr Bushell, the Independent Financial Adviser, met with representatives from bfinance to agree the tender questionnaire.
5. The tender deadline date was 3 February 2003 and the number of manager tenders submitted for each mandate were as follows: -

15 tenders for multi-asset management

28 tenders for global equities management

35 tenders for UK equities management

24 tenders for Fixed Income management

18 tenders for Property Fund management

6. At the time this report was going to print ‘bfinance’ were carrying out analysis of the tender data with a view to producing a full written report by 28 February 2003.

Outstanding Issues in the Appointment Process

7. Officers and Mr Bushell will be evaluating the management tenders and will be assisted by the quantitative and qualitative reports produced by ‘bfinance’. Following the evaluation process a short list of prospective managers will be drawn up for each of the five mandates set out in paragraph 1.
8. Following the drawing up of the short lists a consultant will be appointed to assist officers and members in the latter stages of the investment appointment process. The consultant will be invited to comment on the short lists and asked to confirm that all the candidates have the necessary skill and credentials to carry out the mandates.
9. Officers and Mr Bushell will then conduct visits to the short listed candidates, during the period 12 March to 28 March, where this is considered desirable. The visits will be carefully planned to ensure that we are setting the agenda and not merely seeing the companies marketing personnel.
10. The presentation and appointment interviews are scheduled to take place during the fortnight commencing 31 March 2003. Up to five days will need to be set aside for this purpose as there are potentially five mandates. It is essential that members should be involved in this selection process. The options open to the Committee are as follows:

• The full Committee interviews all the (short listed) applicants and makes all the decisions;
• The Committee deputes groups of its members (perhaps 3 county and 1 district for each) to act as interview panels, who report back to the full Committee to make the decision;
• The Committee creates one or more sub-committees to conduct the interviews and make the appointments.

11. Officers do not favour the first option because of the difficulties of managing an interview and selection process with the number of participants that this option would involve.
12. The dates available within the County hall meeting complex are 31 March, 4 April, 7 April, 10 April and the 15 – 17 April (one of which would be needed for the special meeting). Members have been asked in advance of this meeting to keep their diaries free as far as possible. Alternative dates within the above period will need to be organised at a venue outside of County Hall.
13. Officers, Mr Bushell and the consultant will be assisting members throughout the whole of the interview process. Members will be provided in advance of the interviews with profiles and other useful data on the short listed managers, provided by ‘bfinance’ and the consultant. Written summaries of the visits made by the officers and Mr Bushell to the investment houses will also be circulated. This information will cover an investment house’s investment performance track record, risk controls, fee structure, investment style, investment management process and resources. The background and experience of the team that would manage the Oxfordshire portfolio, were the investment company to be appointed, will also be provided, and this will be supplemented by any useful observations provided by the consultants.

RECOMMENDATIONS

14. The Committee is RECOMMENDED to:

1. note the appointment progress as outlined in the report;
2. decide which of the alternative Fund Manager interview processes, as outlined in paragraph 10 above, should be adopted; and
3. in the event of deciding on the working group/sub-committee approach, agree which members are to be involved in the interview process.

CHRIS GRAY
Director for Business Support & County Treasurer

Background Papers: Nil

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

January 2003.

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