Return to AgendaITEM PF3
PENSION FUND committee
MINUTES of the meeting held on 13 December 2007 commencing at 10.15 am and finishing at 3.58 pm
Present:
Voting Members: Councillor David Harvey - in the chair
Councillor Tony Crabbe Councillor Neville Harris Councillor Mrs Heathcoat (in place of Councillor Bill Service)Councillor Ray Jelf Councillor Jim Moley
By Invitation: Mr A Bushell (Independent Financial Adviser) Mr P Harris (UBS) Ms V Higley (UBS) Mr L Robb (Baillie Gifford) Mr I McCombie (Baillie Gifford) Mr C Archer (Hewitt Bacon and Woodrow)
Officers:
Whole of meeting: Mr S Collins and Mrs S Fox (Shared Services), , Ms J Hydari, Mr T Wheeler and Ms M Holyman (Corporate Core)
Part of meeting: Ms S Scane (Assistant Chief Executive and Chief Finance Officer) (for items 9E-13E)
The Committee considered the matters, reports and recommendations contained or referred to in the agenda for the meeting, and decided as set out below. Except insofar as otherwise specified, the reasons for the decisions are contained in the agenda and reports, copies of which are attached to the signed Minutes.
59/07 APOLOGIES FOR ABSENCE AND TEMPORARY APPOINTMENTS
Apologies for absence and temporary appointments were received as follows:
60/07 DECLARATIONS OF INTEREST
Councillors Harvey, Mrs Heathcoat and Moley declared personal interests as members of the Pension Fund Scheme under the provisions of Section 18 of the Local Government and Housing Act 1989.
61/07 MINUTES
The Minutes of the meeting of the Committee held on 14 September 2007 were approved and signed.
62/07 ACTUARIAL VALUATION (Agenda Item 5)
Mr Chris Archer, Hewitt Bacon and Woodrow, attended the Committee meeting to present the key issues arising from the Actuary’s triennial valuation of the Oxfordshire Pension Fund, as at 31 March 2007. Mr Archer presented the key issues which were summarised in a booklet which was circulated at the meeting, a copy of which is appended to the signed copy of the minutes. Members asked questions.
RESOLVED: to:
(a) thank Mr Archer for his presentation;
(b) ask officers to ensure that information to be presented to the Committee could be read easily.
63/07 OVERVIEW OF PAST AND CURRENT INVESTMENT POSITION (Agenda Item 6)
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 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 September 2007.
On Table 1, he reported that the value of the pension fund portfolio had fallen by ½%: in particular UK equities had fallen by 3.3% to £335m, overseas equities by 4.2% to £353m and bonds had risen by 8.8% to £173m.
On Table 2 (UBS), he pointed out that the total value of the fund was £332m. He added that UK equities were in line with the benchmark, overseas equities were slightly above the benchmark, bonds and property were below the benchmark and cash was held.
On Table 3 (Alliance Bernstein), he reported that UK and overseas equities were marginally below the benchmark (highlighting that the main variant were the emerging markets which were 5.7% over the benchmark and North America which was 9% below the benchmark).
On Table 4, he reported that Legal & General was virtually fully invested and highlighted that UK gilts were 5% above the benchmark and index-linked were 5.5% below the benchmark. He said that Baillie Gifford was virtually fully invested. He added that private equity was 0.5% below the benchmark and hedge funds were in line with the benchmark.
On Table 5, he reported that there had been net purchases of £3.9m of UK equities, net sales of overseas equities, net purchases of bonds (including £7m of corporate bonds) and £6.4m had been invested in private equity. The market value of UK and overseas equities, property and private equity had fallen and the market value of bonds had risen and of hedge funds marginally.
On Table 6, he reported that the value of private equity had fallen slightly to £57m.
On Table 7, he reported that the subscription had closed and £1.4m had been invested in Partners Group and a small sum in Adams Street. There had been small distributions from Partners Group and larger distributions from Schroders.
On Table 8, he reported that for the quarter ended 30 September 2007, the fund had performed below the benchmark: in particular, equities, property and hedge funds had performed below their benchmark, bonds had performed in line with the benchmark and private equity had outperformed the benchmark. For the three years ended 30 September 2007, he reported that the fund had performed just below the benchmark: in particular UK and overseas equities had performed below the benchmark, bonds had performed in line with the benchmark although corporate bonds had performed well and property, hedge funds and private equity had outperformed the benchmark.
On Table 9 (UBS), he said that for the quarter and the six months ended 30 September 2007, overall the fund had performed below the benchmark: in particular, UK and overseas equities had performed below the benchmark. For the three years ended 30 September 2007, he reported that the fund had performed below the benchmark: in particular, UK and overseas equities were below the benchmark and bonds had performed in line with the benchmark.
On Table 10, he reported that for the quarter ended 30 September 2007, Alliance Bernstein had underperformed the benchmark, highlighting UK and overseas equities (in particular Pacific Basin). For the six months ended 30 September 2007, the fund had underperformed the benchmark. For the three years ended 30 September 2007, he reported that the fund had outperformed the benchmark.
On Table 10, he reported that for the quarter ended 30 September 2007 and for the twelve months and three years ended 30 September 2007, Baillie Gifford had performed below the benchmark. He reported that for the quarter ended 30 September 2007 and for the twelve months ended 30 September 2007, Legal & General had performed below the benchmark and for the three years ended 30 September 2007, its performance had been 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 9E, 10E and 11E on the agenda.
64/07 EXEMPT ITEMS
RESOLVED: that the public be excluded for the duration of items 7E-14E in the Agenda since it is 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 is considered that, in all the circumstances of each case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information.
ITEM FOLLOWING THE EXCLUSION OF THE PRESS AND PUBLIC
65/07 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 updated the Committee orally at the meeting.
RESOLVED: to receive the report and tables, to receive the oral report, to consider any further action arising on them and to bear the Independent Financial Adviser’s conclusions in mind when considering the Fund Managers’ reports.
66/07 REVIEW OF THE PENSION FUND’S INVESTMENT MANAGEMENT (Agenda Item PF8E)
The Committee considered a report (PF8E) which reviewed the investment management of the pension fund since the changes in 2003. The Independent Financial Adviser and the Assistant Chief Executive and Chief Finance Officer both introduced the report to explain the reasons for their views expressed in the report.
RESOLVED:
(a) (on a motion by Councillor Crabbe and seconded by Councillor Harvey and carried by 4 votes to 0 and one member abstaining) to transfer the UK equity portfolio managed by UBS to an index tracker to be managed passively;
(b) to transfer the fixed interest portfolio managed by UBS to Legal & General;
(c) to review formally the performance of Baillie Gifford in 6 months;
(d) that within the allocation to bonds in the Pension Fund’s customised benchmark index-linked be reduced from 6% to 5%, UK conventional gilts from 4% to 3%, and that a new target allocation of 2% be made for overseas bonds to include overseas sovereign index linked. The entire holding of the overseas bonds must continue to be hedged back into sterling. Flexibility ranges would need to be fixed or amended around these new targets;
(e) to authorise Legal & General to invest 0-15% of the corporate bond target of 6% in their high income pooled fund (containing non-investment grade bonds) and to amend the ranges of the three investment grades and the investment management agreement to permit investment in non–investment grade bonds and in pooled funds;
(f) to lift the restriction on non-benchmark assets within the property target of 8% of total assets from 35% to 50% of total property assets and to raise the limit on any individual non-benchmark fund/asset from 10% to 15%;
(g) that up to two percentage points (25% of the total property target of 8%) may be invested in European property funds or companies with the currency exposure hedged back to sterling and that the investment management agreement be amended to permit such investment;
(h) to review formally the performance of the Tactical Asset Allocation Fund in 6 months;
(i) to review the performance of hedge funds in 6 months.
67/07 REPORT OF MAIN ISSUES ARISING FROM REPORTS OF THE FUND MANAGERS NOT REPRESENTED AT THIS MEETING (Agenda Item 9E)
The Independent Financial Adviser reported that Alliance Bernstein’s underperformance had continued into the current quarter.
RESOLVED: to note the reports.
68/07 UBS GLOBAL ASSET MANAGEMENT (Agenda Item 10E)
The representatives (Mr P Harris and Ms V Higley) of the Fund Manager reported and reviewed the present investment of their part of the Fund and their strategy against the background of the current investment scene for the period which ended on 30 September 2007 and gave their views on the future investment scene. In response to a question, Mr Harris said that a rebate on past fees for the TAA was unlikely but they were considering the revision of fees for the future.
RESOLVED: to receive UBS Global Asset Management’s quarterly valuation and presentation reports for the quarter ending on 30 September 2007.
69/07 BAILLIE GIFFORD (Agenda Item 11E)
The representatives (Mr L Robb and Mr I McCombie) 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 September 2007 and gave their views on the future investment scene. Mr Robb said that performance had been disappointing and accepted that some mistakes on sales/purchases of certain stocks had been made. He said that the market appeared to be moving to a climate which favoured their style of investment management. Members asked questions. Councillor Harvey pointed out that the Committee was unhappy with their past performance and wished to see an improvement in it over the next six months.
RESOLVED: to receive Baillie Gifford’s quarterly valuation and presentation reports for the quarter ending on 30 September 2007.
70/07 SUMMARY BY THE INDEPENDENT FINANCIAL ADVISER (Agenda Item 12E)
The Independent Financial Adviser said that he had nothing to add to previous comments.
71/07 ANNUAL REVIEW OF THE INDEPENDENT FINANCIAL ADVISER (Agenda item 13E)
The Committee considered a report (PF13E) which reviewed the activities of the Independent Financial Adviser for the twelve-month period ending 30 November 2007.
RESOLVED: to:
(a) instruct the Officers to go out to tender for the appointment of the Independent Financial Adviser;
(b) continue to employ the Independent Financial Adviser in this position for the next twelve months and to upgrade his fee by 2.475%, in line with the Local Authority Green Book Pay Award for 2007/08, to take effect from 1 December 2007;
(c) award Mr Bushell an ex gratia payment as set out in the report.
(Mr Bushell left the room for this item.)
72/07 OPEN TENDER PROCESS FOR THE APPOINTMENT OF A GLOBAL CUSTODIAN (Agenda Item 14E)
The Committee considered a report (PF14E) which reviewed the existing contract arrangements which terminate on 31 March 2008.
RESOLVED: to:
(a) note the report;
(b) delegate the interview and appointment process to Officers and the Independent Financial Adviser;
(c) request Officers and the Independent Financial Adviser to report back to the Committee on their reasons for appointing the successful Global Custodian.
ITEMS FOLLOWING THE RE-ADMISSION OF THE PRESS AND PUBLIC
73/07 FORMAL ADOPTION OF THE PENSION FUND ANNUAL REPORT AND ACCOUNTS FOR 2006/07 (Agenda Item 15)
The Committee considered the Annual Report and Accounts 2006/07 which were recommended for adoption.
RESOLVED: to adopt formally the Pension Fund Annual Report and Accounts 2006/07.
74/07 PART-TIME EMPLOYEES (Agenda Item 16)
The Committee considered a report (PF16) which sought the Committee's approval on how previous part-time service should be dealt with as the amending regulations, which had been anticipated for some considerable time, had not yet materialised.
RESOLVED: to:
(a) approve the approach detailed in the report to resolve the outstanding cases;
(b) inform members how many employees were affected by the proposals.
75/07 ADMISSION AGREEMENTS (Agenda Item 17)
The Committee considered a report (PF17) which set out three admission requests from QTASS, Sanctuary Housing Association and Cherwell Housing Trust.
RESOLVED: to:
(a) approve the applications in the report in principle;
(b) delegate authority to the Assistant Head of Finance (Shared Services) to agree final admission.
76/07 ILL-HEALTH CONSULTATION PAPER (Agenda Item 18)
The Committee considered a report (PF18) on a consultation paper issued by the Department for Communities and Local Government which sought comments on the proposed changes to the ill-health provisions set out in the Local Government Pension Scheme (Benefits, Membership and Contribution) Regulations 2007.
RESOLVED: to:
(a) support the introduction of a third tier of ill health benefits;
(b) agree that one year is a reasonable period for review;
(c) approve the draft response attached to the report, subject to amending the third paragraph of the letter for clarity.
77/07 CIPFA LOCAL AUTHORITY PENSION FUND INVESTMENT STATISTICS (Agenda Item 19)
The Committee considered a report (PF19) which set out statistics covering investment returns for the 3, 5 and 10-year periods ended 31 March 2007. The statistics also covered asset distribution, showing the percentage weighting of funds in each major asset class.
RESOLVED: to receive the report.
78/07 FUTURE PROGRAMME AND TIMETABLE FOR INVESTMENT MANAGER MONITORING ARRANGEMENTS (Agenda Item 20)
The Committee considered a report (PF20) which set out a new programme for investment manager monitoring arrangements for the period February 2008 to February 2009.
RESOLVED: to agree the programme of manager meetings as set out in the report.
79/07 ANNUAL PENSION FORUM (Agenda Item 21)
The Assistant Chief Executive and Chief Finance Officer reported orally on the Pension Forum held on 4 December 2007.
RESOLVED: to note the report.
80/07 CORPORATE GOVERNANCE AND SOCIALLY RESPONSIBLE INVESTMENT (Agenda Item 22)
The Assistant Chief Executive and Chief Finance Officer reported that she had nothing specific to report for this quarter but it should be noted that all the managers had included pages within their valuation reports which provided details on their voting at company AGMs, engagement with companies and their involvement with other socially responsible initiatives.
RESOLVED: to note the report.
................................................................................... in the Chair
Date of signing.................................................................. 2008
|