Agenda and minutes

10:00

Councillor Sandy Lovatt attended for Councillor Stewart Lilly. Councillor Richard Langridge extended his apologies.

Councillors Darke, Fooks, Harvey, Patterson and Service declared personal interests as members of the Pension Fund Scheme under the provisions of Section 18 of the Local Government & Housing Act 1989.

To approve the minutes of the meeting held on 2 December 2011 (PF3) and to receive information arising from them.

The Minutes of the meeting of the Committee held on 2 December 2011 were approved and signed as a correct record.

There were no petitions submitted or any requests to address the meeting by members of the public.

10:10

Tables 1 to 10 are compiled from the custodian's records. The custodian is the Pension Fund's prime record keeper. He accrues for dividends and recoverable overseas tax within his valuation figures and may also use different exchange rates and pricing sources compared with the fund managers. The custodian also treats dividend scrip issues as purchases which the fund managers may not do. This may mean that there are minor differences between the tabled figures and those supplied by the managers.

The Independent Financial Adviser will review the investment activity during the past quarter and present an overview of the Fund’s position as at 31 December 2011 using the following tables:

In addition to the above tables, the performance of the Fund Managers over the past 3 years has been produced graphically as follows:

Graph 1          -           Value of Assets

Graph 2 – 3    -           Baillie Gifford

Graph 4 – 5    -           Legal & General

Graphs 6 -10 -           UBS

The Committee is RECOMMENDED to receive the tables and graphs, and that the information contained in them be borne in mind, insofar as they relate to items 9, 10 and 11 on the agenda.

Mr Davies  reported that the final quarter for 2011 had seen a strong equity and bond appreciation for the Oxfordshire Pension Fund amounting to an acquisition of £63m. Since the start of 2012 there had been a further appreciation which, together with the above, had recouped the large losses of the third quarter of 2011. He added that the Oxfordshire Pension Fund was close to featuring in the top quartile for England and Wales in terms of performance, based on the latest data published by the WM Company.

RESOLVED: to note the comments of the Independent Financial Adviser and to receive the tables and graphs; and that the information contained in them be borne in mind insofar as they related to items 9, 10 and 11 on the agenda.

The Committee is RECOMMENDED that the public be excluded for the duration of items 7, 8, 9, 10, 11, 12 and 13 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.

THE REPORTS RELATING TO THE EXEMPT ITEMS HAVE NOT BEEN MADE PUBLIC AND SHOULD BE REGARDED AS STRICTLY PRIVATE TO MEMBERS AND OFFICERS ENTITLED TO RECEIVE THEM.

NOTE: In the case of items 11and 12, there are no reports circulated with the Agenda. Any exempt information will be reported orally.

It was RESOLVED that the public be excluded for the duration of items 7,8,9,10,11,12 and 13 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 1 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 circumstances of each case, the public interest in maintaining the exemption outweighed the public interest in disclosing the information.

10.25

To approve the Exempt Minute of the meeting held on 2 December 2011 (PF7) and to receive information arising from them.

The following information refers directly to the financial arrangements between the administering authority and individual members of the Pension Scheme.  The public should therefore be excluded for the consideration of this report because its discussion in public would be likely to lead to the disclosure to members of the public present of information in the following categories prescribed by Part I of Schedule 12A to the Local Government Act 1972 (as amended):

1.            Information relating to any individual;

2.            Information which is likely to reveal the identity of an individual;

3.            Information relating to the financial or business affairs of any particular person (including the authority holding that information)

and since it is considered that, in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information, in that such disclosure would infringe the rights of the individual to privacy contrary to the general law and the duty of the authority to respect human rights and to comply with that law.

The Pension Fund Committee determined a compensation payment case using the Internal Dispute Procedure.

The Exempt Minute from the meeting held on 2 December 2011 was approved.

In response to a letter received from the complainant since the last meeting, which had been circulated, in confidence, to all members of the Committee, requesting further negotiation on the agreed compensation level, the Committee upheld the decision made at the last meeting.

10:30

Report of the Independent Financial Adviser (PF8).

The report sets out an overview of the current and future investment scene and market developments across various regions and sectors. The report itself does not contain exempt information and is available to the public. The Independent Financial Adviser will also report orally and any information reported orally will be exempt information.

The public should be excluded during this item because its discussion in public would be likely to lead to the disclosure to members of the public present of information in the following prescribed category:

3.         Information relating to the financial or business affairs of any particular person (including the authority holding that information) and since it is considered that, in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information, in that such disclosure would prejudice the trading activities of the fund managers involved and would prejudice the position of the authority's investments in funding the Pension Fund.

The Committee is RECOMMENDED to receive the report, tables and graphs, 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.

The Committee considered a report (PF8) which set out an overview of the current and future investment scene and market developments across various regions and sectors. Members asked questions and the Independent Financial Adviser responded to them.

RESOLVED: to receive the report, tables and graphs, to receive the oral report of the Independent Financial Adviser and to ask UBS to focus their presentation to the next meeting on the Property and Hedge Fund portfolios, neither of which had performed well for the Fund recently.

10.45

This report (PF9) informs the Committee of the recent decision (subject to contract) to appoint a new Global Equity Fund Manager.  The report sets out the process followed, and the key issues considered in making the final appointment.

The public should be excluded for the consideration of this report because its discussion in public would be likely to lead to the disclosure to members of the public present of information in the following category prescribed by Part I of Schedule 12A to the Local Government Act 1972 (as amended):

3 Information relating to the financial or business affairs of any particular person (including the authority holding that information);

and since it is considered that, in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information, in that disclosure would distort the proper process of open competition, would prejudice the commercial position of the parties involved and would prejudice the position of the authority in the process of the transaction and the Council’s standing generally in relation to such transactions in future, to the detriment of the Council’s ability properly to discharge its fiduciary and other duties as a public authority.

The Committee is RECOMMENDED to note the report, and the decision to appoint Wellington as the new Global Equity Manager for the Fund.

The Committee had before them a report (PF9) informing  them of the recent appointment (subject to contract) of a new Global Equity Fund Manager. The report also set out the process followed and the key issues considered when making the final appointment.

RESOLVED: To note the report and the decision to appoint Wellington as the new Global Equity Manager for the Fund.

11.00

(1)               The Independent Financial Adviser will report orally on the performance and strategy of Baillie Gifford drawing on the tables at Agenda Items 5 and 8.

(2)               The representatives (Mr A. Dickson and Mr I. McCombie) of the Fund Manager will:

(a)       report and review 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 2011;

(b)       give their views on the future investment scene.

In support of the above is their report for the period to 31 December 2011.

At the end of the presentation, members are invited to question and comment and the Fund Managers to respond.

The public should be excluded during this item because its discussion in public would be likely to lead to the disclosure to members of the public present of information in the following prescribed category:

3.         Information relating to the financial or business affairs of any particular person (including the authority holding that information) and since it is considered that, in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information, in that such disclosure would prejudice the trading activities of the fund managers involved and would prejudice the position of the authority's investments in funding the Pension Fund.

The Committee is RECOMMENDED to note the main issues arising from the presentation and to take any necessary action, if required.

Prior to the entry of the Baillie Gifford representatives, the Independent Financial Adviser informed the members that Baillie Gifford continued to perform well and that they were very much fulfilling what was asked of them.

The representatives, Mr. A. Dickson and Mr. I. McCombie, reported on and reviewed the present investments in relation to their part of the Fund and their strategy against the background of the current investment scene for the period which ended 30 December 2011. The representatives responded to members’ questions.

Members of the Committee asked questions and received responses in respect of the following areas:

• The implications of shifts in population demographics on the market place in a particular country, such as China;
• Investment in, and evidence of research and development in particular products;
• Reasons why Fund Managers are continuing investment/discontinuing investment in particular companies and growth areas; and
• The overall monetary situation in Europe.

RESOLVED: to note the main issues arising from the presentation and to take any necessary action, if required.

11:40

The Independent Financial Adviser will report orally on the main issues arising from the reports from Baillie Gifford in conjunction with information contained in the tables (Agenda Item 7).

The public should be excluded during this item because its discussion in public would be likely to lead to the disclosure to members of the public present of information in the following prescribed category:

3.         Information relating to the financial or business affairs of any particular person (including the authority holding that information) and since it is considered that, in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information, in that such disclosure would prejudice the trading activities of the fund managers involved and would prejudice the position of the authority's investments in funding the Pension Fund.

The Committee is RECOMMENDED to note the main issues arising from the reports and to take any necessary action, if required.

The Independent Financial Adviser reported orally on the main issues arising from the reports from UBS and Legal & General, in conjunction with information contained within the tables (Agenda Item 5).

Mr Davies reported that he and the officers had met with both Legal & General and UBS and that the former’s management of the Fund’s fixed income was good. The performance of UBS during the last quarter had improved and they had beaten their benchmark by 2%. They had also had a good start to this year in January and February. Mr Davies reported also that he had conducted a separate meeting with the UBS Hedge Fund representatives and that performance in the last quarter of 2011 was disappointing. He added that he was expecting performance for the first quarter of 2012 to be better.

RESOLVED: to note the Independent Financial Adviser’s oral report.

11:45

The Independent Financial Adviser will, if necessary, summarise any other issues arising from the monitoring of our Fund Managers and answer any questions from members.

The public should be excluded during this item because its discussion in public would be likely to lead to the disclosure to members of the public present of information in the following prescribed category:

3.         Information relating to the financial or business affairs of any particular person (including the authority holding that information) and since it is considered that, in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information, in that such disclosure would prejudice the trading activities of the fund managers involved and would prejudice the position of the authority's investments in funding the Pension Fund. 

Mr Davies reported that he had no additional comments to make on the existing Fund Managers performance and strategy. He reported, however, that the transition over to the new Global Equity Fund Manager was progressing well. Mr Davies also reported that he had visited various companies to review the opportunities open on infrastructure investment, and was currently awaiting for further information on the outcome of discussions between the Government, NAPF and the Pension Protection Fund on the establishment of a national infrastructure platform which would provide a mechanism for Pension Funds to invest in national infrastructure projects.

RESOLVED: To note the Independent Financial Adviser’s report.

11.50

The Pension Fund employs the services of an Independent Financial Adviser (IFA).  The activities of the IFA are reviewed by the Committee on an annual basis.  Peter Davies, the current IFA, was appointed from February 2009 for five years with an option to extend for a further five years.  This is the third annual review of his activities (PF13).

This item is exempt because its discussion in public might lead to the disclosure to members of the public present information relating to the financial or business affairs of any particular person (including the authority holding the information).

The Pension Fund Committee are RECOMMENDED to note the report and consider if they wish to offer any feedback to Mr Davies in relation to his performance as IFA during the last year.

The Pension Fund employs the services of an Independent Financial Adviser (IFA) whose activities are reviewed by the Committee on an annual basis. Peter Davies, the current IFA, was appointed from February 2009 for five years with an option to extend for a further five years. The Committee had before them the third annual review of his activities (PF13) and were asked to consider if they wished to offer any feedback to Mr Davies in relation to his performance over the last year.

Mr Davies left the room for the duration of this item.

Mrs Ross amended paragraph 3, page 47 of the report deleting the part sentence beginning with ‘No increase’ and ending with ‘because’.

Members of the Committee joined in thanking Mr Davies for all his hard work over the last year, and for the clarity of his reports. He was requested to send a short summary of the key issues discussed at his meetings with Fund Managers to members of the Committee and to continue to report his comments orally if there was insufficient time to record them in the written word.

READMITTANCE OF THE PRESS AND PUBLIC

12.05

This report (PF14) sets out the proposed arrangements for monitoring the performance of the Fund Managers during 2012/13.

The Committee is RECOMMENDED to approve the Fund Manager monitoring arrangements as set out in PF14.

The Committee considered a report (PF14) which set out the proposed arrangements for monitoring the performance of the Fund Managers during 2012/13.

RESOLVED: to approve the Fund Manager monitoring arrangements as set out in report PF14.

12.10

This report will set out the key elements of the Business Plan for administration and investment teams for the 2012/13 year. The Committee will be asked to approve the Plan, the associated budget and the risk register for the Fund.  A proposed Pension Fund Cash Management Strategy is also before the Committee for consideration.

The proposed Business Plan, associated budget and Risk Register is attached at PF15(a).

The Cash Management Strategy report, together with its Annexes are  attached for consideration at PF15(b).

The Committee is RECOMMENDED to :

(a)              approve the Business Plan and budget for 2012/13 as set out in Annex 1;

(b)              approve the Pension Fund Cash Management Strategy for 2012/13:

(i)                 delegate authority to the Assistant Chief Executive & Chief Finance Officer to make changes necessary to the Pension Fund Cash Management Strategy during the year, in line with changes to the County Council’s Treasury Management Strategy;

(ii)               delegate authority to the Assistant Chief Executive & Chief Finance Officer to open separate pension fund bank, deposit and investment accounts as appropriate;

(iii)             delegate authority to the Assistant Chief Executive and Chief  Finance Officer to borrow money for the pension fund in accordance with the regulations.

The Committee had before them key elements of the Annual Business Plan and Budget 2012/13 for the administration and investment teams. Members were asked to approve the Plan, the associated budget and the risk register for the Fund (PF15(a)). A proposed Pension Fund Cash Management Strategy was also before the Committee for consideration at PF15(b)

RESOLVED to :

(a)               approve the Business Plan and budget for 2012/13 as set out in Annex 1;

(b)               approve the Pension Fund Cash Management Strategy for 2012/13:

(i)                 delegate authority to the Assistant Chief Executive & Chief Finance Officer to make changes necessary to the Pension Fund Cash Management Strategy during the year, in line with changes to the County Council’s Treasury Management Strategy;

(ii)               delegate authority to the Assistant Chief Executive & Chief Finance Officer to open separate pension fund bank, deposit and investment accounts as appropriate;

(iii)             delegate authority to the Assistant Chief Executive and Chief  Finance Officer to borrow money for the pension fund in accordance with the regulations.

12.30

This report (PF16) updates the Committee on the progress to introducing change to the Local Government Pension Scheme following the review of Lord Hutton.  It also provides information to the Committee on proposed changes to the current LGPS regulations, and the response made by officers to this consultation.

The Pension Fund Committee is RECOMMENDED to note the latest position on the reform of the LGPS, and the consultation response submitted by officers on the draft LGPS (Miscellaneous) Regulations 2012.

The Committee had before them a report (PF16) which gave an update on progress in relation to the changes being made to the Local Government Pension Scheme (LGPS) following Lord Hutton’s review. The report also provided information on the proposed changes to the current LGPS regulations and details of the officer response made to the consultation.

RESOLVED: to note the latest position on the reform of the LGPS; and to note also the consultation response submitted by officers on the draft LGPS (Miscellaneous) Regulations 2012.

12.50

This report (PF17) responds to a letter sent to all Local Authority Leaders and Chief Executives in England setting out the statutory position regarding Academies and the Local Government Pension Scheme.  The letter expresses concern that the basis of the calculation of the employer contribution rate for some Academies across the Country is inconsistent, and has led to Academies paying unjustifiably higher contributions compared to maintained schools in the same area.  It therefore sets out the preferred approach of allowing Academies to be pooled with their former local authority.

This report sets out the background to the position in Oxfordshire, the issues surounding pooling and asks the Committee to determine its views on the options available, and make any changes to the Funding Strategy Statement deemed necessary at this time.  The views of the County Council Cabinet, following their discussion on this item on 13 March 2012 will be provided to the Committee. 

Subject to the views of the County Council’s Cabinet on allowing academies to pool with the County Council, the Committee are RECOMMENDED to defer establishing new pooling arrangements for Academies in Oxfordshire until such time as their numbers are more significant, representative views of Academy Trustees can be taken on board, and any pattern of Umbrella Trusts can be established.

A joint letter had been sent by the Secretaries of State for Education & for Communities & Local Government to all Leaders and Chief Executives in England setting out the statutory position regarding academies and the Local Government Pension Scheme. The letter expressed concern that the basis of the calculation of the employer contribution rate for some academies across the country was inconsistent and had led to academies paying unjustifiably higher contributions compared to maintained schools within the same area. The letter proceeded to set out the preferred approach, which was to allow academies to be pooled with their former local authorities for LGPS purposes.

The report (PF17) set out the position in Oxfordshire and the issues regarding pooling. It asked members of the Committee to determine its views on the options available and to make any necessary changes to the Funding Strategy Statement.

It was reported that the Cabinet on 13 March 2012 had not given their support to the option of allowing Academies within Oxfordshire to be pooled with the County Council for LGPS purposes.

Following a discussion it was

RESOLVED: to

(a)                           note that Cabinet on 13 March 2012 did not support the option of allowing Academies to be pooled with the County Council for LGPS purposes; and

(b)                           defer establishing new pooling arrangements for Academies in Oxfordshire until such time as their numbers were more significant, when representative views of Academy Trustees could be taken on board, and any pattern of Umbrella Trusts could be established.

13.00

This report (PF18) informs the Committee of the amounts approved for write off under the Council’s Scheme of Financial Delegation.

The Pension Fund Committee is RECOMMENDED to note the report

The Committee noted a report (PF18) which informed them of any Write Off’s that had been agreed by the officers, in line with the approved arrangements set out in the Scheme of Financial Delegation for the Fund.

RESOLVED: to note the report.

13:05

As requested at the last meeting on 2 December 2011, the report (PF19) provides a summary of the Pension Fund Investment Managers’ policies and activities in relation to company engagement. It also sets out the Pension Fund Committee’s responsibilities in relation to monitoring the application and effectiveness of these policies.

The Committee are RECOMMENDED to consider the policies and performance of the fund’s investment managers in relation to company engagement and if they meet the requirements of the Oxfordshire County Council Pension Fund.

As requested at the last meeting on 2 December 2011, the Committee had before them a report (PF19) which summarised the Pension Fund Investment Manager’ policies and activities in relation to company engagement. The report also set out the Pension Fund Committee’s responsibilities in relation to the application, the monitoring of and the effectiveness of these policies.

Some members, whilst welcoming the report, suggested that, rather than the Fund Managers setting the principles, the Committee should be more proactive in giving  them certain guidelines in which to work, adding that this would ensure that the Committee was acting responsibly. Mrs Ross informed the meeting that the Business Plan, which was due to be presented to a future meeting, would be reviewing the Committee’s voting policies.

RESOLVED: to revisit this topic again at a future meeting when the review of the Committee’s voting policies was brought before the Committee for consideration.