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ITEM PF5

PENSION FUND COMMITTEE

MINUTES of the meeting held on 23 February 2007 commencing at 10.15 am and finishing at 1.10 pm

Present:

Voting Members:     

Councillor Rodney Rose - in the chair

Councillor Bill Bradshaw
Councillor Neville Harris
Councillor David Harvey
Councillor Jim Moley
Councillor Bill Service
Councillor David Wilmshurst

District Council Representatives:

Michael Howes
Bob Price

Officers:

Whole of meeting: Ms J Hydari, Mr T Wheeler and Ms M Holyman (Corporate Core)

Part of meeting: Mr D Bishop (Head of Democratic Services); Mr S Collins and Mrs S Fox

By Invitation:

Mr A Bushell (Independant Financial Adviser)
Mr K Barker (UBS Global Asset Management)
Mr M Stemp (UBS Global Asset Management)
Mr L Robb (Baillie Gifford)
Mr I McCombie (Baillie Gifford)
Mr S Gibson (Beneficiaries Observer)

The Committee considered the matters, reports and recommendations contained or referred to in the agenda for the meeting, together with a revised copy of Table 10 to correct the figures supplied by the WM Company for Legal & General and an enlarged version of Table 5 for ease of use and decided as set out below.  Except insofar as otherwise specified, the reasons for the decisions are contained in the agenda, reports and revised tables, copies of which are attached to the signed Minutes.

1/07             DECLARATIONS OF INTEREST

Councillors Bradshaw, Harvey, Moley, Price (co-opted member), Rose and Service declared personal interests as members of the Pension Fund Scheme under the provisions of Section 18 of the Local Government and Housing Act 1989.

2/07             MINUTES

The Minutes of the meeting of the Committee held on 24 November 2006 were approved and signed.

3/07             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 31 December 2006.  On Table 1, he reported that the value of the Fund had increased to over £1 billion for the first time.  On Table 2 (UBS), he reported that UK and overseas equities were both in line with the benchmark and bonds and property were below the benchmark.  Cash held was 2.2%.  On Table 3 (Alliance Bernstein), he pointed out that UK equities were above the benchmark, overseas equities and, in particular North American equities, were below the benchmark and Emerging Markets were above the benchmark.  On Table 4, for Legal & General, he highlighted that UK gilts were above the benchmark and corporate bonds were below the benchmark and for Baillie Gifford that it was virtually fully invested in UK Equities.  On Table 5, he reported that there had been net purchases of UK and overseas equities and bonds and purchases of property and private equity.  On Table 6, he reported that the value of private equity had risen by 6%.  On Table 7, he pointed out that he had taken the opportunity to sell a further tranche of the Standard Life European Private Equity Trust holding.  On Table 8, covering the total fund, he said that the performance for the last quarter and for the nine-month period had been slightly below the benchmark but over the 3-year period, the fund had outperformed the benchmark.  On Table 9 (UBS), he pointed out that, for the three periods, performance had been below the benchmark.  On Table 10, he reported that, for the three periods, Alliance Bernstein had outperformed the benchmark, Baillie Gifford had performed below the benchmark and Legal & General had performed in line with the benchmark.

RESOLVED:       to receive the tables, and that the information contained in them be borne in mind, insofar as they related to items 7E, 8E and 9E on the agenda.

4/07             EXEMPT ITEMS

RESOLVED:          that the public be excluded for the duration of items 6E- 14E 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.

5/07             OVERVIEW AND OUTLOOK FOR INVESTMENT MARKETS*

(Agenda Item 6E)

The Committee considered a report (PF6E) which set out an overview of the current and future investment scene and market developments across various regions and sectors.  The Independent Financial Adviser expressed the view that markets could suffer a correction following a very strong run since March 2003.  He drew particular attention to paragraph 9 of his report.

RESOLVED:         to receive the Independent Financial Adviser’s oral and written reports and to bear his conclusions in mind when considering the Fund Managers’ reports.

6/07             REPORT OF MAIN ISSUES ARISING FROM REPORTS OF THE FUND MANAGERS NOT REPRESENTED AT THIS MEETING*

(Agenda Item 7E)

The Independent Financial Adviser reported orally on the main issues arising from the reports from Alliance Bernstein and Legal & General.  He said that he had nothing to report on Legal & General.  On Alliance Bernstein he reported that its performance had been very good and this had been achieved at the low risk end of their risk parameter. 

RESOLVED:          to note the main issues arising from the reports.

7/07             UBS GLOBAL ASSET MANAGEMENT*

(Agenda Item 8E)

The representatives (Mr K Barker and Mr M Stemp) 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 31 December 2006.  Members questioned them on a number of issues including their continuing poor investment performance.  The UBS representatives maintained their view that commodity stocks, particularly mining stocks, were still expensive and they had therefore continued to remain underweight in this sector. This was the main reason for their underperformance.

RESOLVED:          to receive UBS Global Asset Management’s quarterly valuation and presentation reports for the quarter ending 31 December 2006. 

8/07             BAILLIE GIFFORD*

(Agenda Item 9E)

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 31 December 2006.  Members questioned them on a number of issues including the holding in one company about which a member had ethical reservations.

RESOLVED:         to receive Baillie Gifford’s quarterly valuation and presentation reports for the quarter ending 31 December 2006. 

9/07             SUMMARY BY THE INDEPENDENT FINANCIAL ADVISER*

(Agenda Item 10E)

The Independent Financial Adviser said that he had nothing further to add to the comments he had made earlier in the meeting.

RESOLVED:  to note the position.

10/07         REVIEW OF HEDGE FUNDS*

(Agenda Item 11E)

The Committee considered a report (PF11E) reviewing the investment performance, management fees, levels of transparency and reporting standards of hedge funds.

RESOLVED:  to

(a)          note the contents of the report;

(b)          request that officers and the Independent Financial Adviser explore the option of using a hedge fund replication vehicle and report their findings to the Committee.

11/07         VENTURE CAPITAL INVESTMENT*

(Agenda Item 12E)

The Committee considered a report (PF12E) which briefly reviewed Oxford Technology Venture Capital Trusts 3 and 4 and explained why the Oxford Technology was looking to launch a fifth fund through a different vehicle called an Enterprise Capital Fund (ECF). 

RESOLVED:  that

(a)          the Oxfordshire Pension Fund invest up to 10% with a maximum of £3 million in the proposed Oxford Technology 5 Enterprise Capital Fund if it is established; and

(b)          the officers be authorised to issue to Oxford Technology Managers a letter of intent to invest, subject to caveats in paragraph 12 of the report, to support Oxford Technology Managers’ bid to the Department of Trade and Industry.

12/07         CONFIDENTIALITY OF INVESTMENT MANAGERS’ REPORTS*

(Agenda Item 13E)

The Committee considered a report (PF13E) which reviewed the decision by the former Investment Sub-Committee that the quarterly investment reports should be made available for public inspection at County Hall after a period of three months following the date of the relevant meeting. 

RESOLVED:  in the light of legislative changes to rescind the decision of the former Investment Sub-Committee as set out in (a) in the Annex to the report and that all requests from members of the public for investment information contained in the Fund Managers’ reports be treated in accordance with the Council’s Freedom of Information policies and procedures.

13/07         COMPREHENSIVE INVESTMENT MANAGEMENT REVIEW – APPOINTMENT OF CONSULTANT*

(Agenda Item 14E)

The Committee considered a report (PF14E) which discussed the appointment of a consultant to assist with the comprehensive investment management review.

RESOLVED:  to appoint the Independent Financial Adviser for the fixed fee set out in the report to undertake the comprehensive review of the Pension Fund’s investment management arrangements in 2007/08.

(The Independent Financial Adviser left the room for the discussion of this item.)

ITEMS FOLLOWING THE RE-ADMISSION OF THE PRESS AND PUBLIC

14/07         ANNUAL REVIEW OF THE PENSION FUND'S STRATEGIC ASSET ALLOCATION

(Agenda Item 15)

The Committee considered a report (PF15) which summarised the strategic asset allocation changes made by the Pension Fund in August 2005. 

RESOLVED:         that the strategic asset allocation incorporated in the Oxfordshire Pension Fund customised benchmark should remain unchanged for the time being.

15/07         PENSION FUND BUSINESS PLAN AND BUDGET FOR 2007/08

(Agenda Item 16)

The Committee considered a report (PF16) which set out the annual business plan for 2007/08 financial year and also included a member training programme and an investment management/scheme administration budget.

RESOLVED:         to:

(a)         approve the Oxfordshire Pension Fund Business Plan, as set out in Annex 1 to the report, for 2007/08;

(b)         approve the Oxfordshire Pension Fund’s Investment Management and Scheme Administration Budget, as set out in Annex 2 to the report, for 2007/08.

16/07         THE LOCAL GOVERNMENT PENSION SCHEME (BENEFITS, MEMBERSHIP AND CONTRIBUTIONS) REGULATIONS 2007

(Agenda Item 17)

The Committee considered a report (PF17) which set out the key issues and included a draft response for submission to the Office of Communities and Local Government (CLG).  The Head of Finance & Procurement reported that the draft administration regulations had been received after the preparation of the report.  She sought the Committee’s agreement to delegate to her the drafting and finalising of a response to the CLG on the draft administration regulations subject to consultation with the Chairman, Deputy Chairman and Opposition Group Spokesman of the Committee.

RESOLVED:  to

(a)          note the content of the report and to agree the draft response set out in Annex 1 to the report for submission to CLG;

(b)          authorise the Head of Finance & Procurement, after consultation with the Chairman, the Deputy Chairman and the Opposition Group Spokesman, to send a response on the draft administration regulations to the CLG by 23 March 2007.

17/07         CIPFA LOCAL AUTHORITY PENSION FUND INVESTMENT STATISTICS

(Agenda Item 18)

The Committee considered a report (PF18) which compared the Pension Fund's asset allocation with those of other local authority and private sector pension funds.  It compared Oxfordshire's 3-, 5- and 10-year investment performance returns with those of other English County Council Pension Funds.  The report also discussed whether the investment returns achieved by Oxfordshire were meeting the Actuary's three year and longer term investment return assumptions, which he had made in the March 2004 Actuarial Valuation.

RESOLVED:  to receive the report.

18/07         ANNUAL PENSION FORUM

(Agenda Item 19)

The Committee considered a report (PF19) which updated the Committee on the Pension Forum held in November 2006.

RESOLVED:         to note the report.

19/07         CORPORATE GOVERNANCE AND SOCIALLY RESPONSIBLE INVESTMENT

(Agenda Item 20)

The Head of Finance & Procurement reported that there was nothing specific to report for this quarter but that 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.................................................................. 2007

*  The reports relating to the exempt items have not been made public and should be regarded as strictly private to those members and officers entitled to receive them.