Agenda, decisions and minutes

Venue: County Hall, New Road, Oxford

Contact: Julie Dean  Tel: (01865) 815322; E-Mail:  julie.dean@oxfordshire.gov.uk

Items
No. Item

22/15

Election of Chairman 2015/16

To elect a Chairman for the municipal year 2015/16 – to the first meeting of the next municipal year 2016/17.

Minutes:

Councillor Stewart Lilly was elected Chairman for the Municipal year 2015/16 – to the first meeting of the next municipal year 2016/17.

23/15

Election of Deputy Chairman 2015/16

To elect a Deputy Chairman for the municipal year 2015/16 – to the first meeting of the 2016/17 municipal year.

Minutes:

Councillor Patrick Greene was elected Deputy Chairman for the municipal year 2015/16 - to the first meeting of the 2016/17 municipal year.

24/15

Apologies for Absence and Temporary Appointments

Minutes:

There were no apologies for absence or temporary appointments.

25/15

Declarations of Interest - see guidance note

Minutes:

Councillors Fooks, Lilly, Owen and Sibley each declared personal interests as members of the Pension Fund Scheme under the provisions of Section 18 of the Local Government & Housing Act 1989.

 

Councillor Lilly declared an interest in the report relating to Agenda Item 8 on account of his son’s employment in the area of earth science and exploratory geology.

26/15

Minutes pdf icon PDF 113 KB

To approve the minutes of the meeting held on 13 March 2015 (PF5) and to receive information arising from them.

Minutes:

The Minutes of the meeting held on 13 March 2015 were approved and signed.

 

 

27/15

Urgent Business - Membership of Local Pension Board

Under the provisions set out in Section100B(4) of the Local Government Act 1972 (as amended) the Chairman elect of the meeting is of the opinion that this item can be taken following Agenda Item 5 as urgent business because of the need for the Local Pension Board to meet prior to the next meeting of this Committee in September.

Minutes:

Under the provisions set out in Section 100B(4) of the Local Government Act 1972 (as amended), the Chairman elect of the meeting was of the opinion that this item could be taken as urgent business because of the need for the Local Pension Board to meet prior to the next meeting of this Committee in September.

 

Sean Collins gave an oral report setting out the reasons for the proposal that Graham Burrow of Gloucestershire County Council be appointed Chairman of the Oxfordshire Local Pension Board.

 

RESOLVED: to appoint Graham Burrow of Gloucestershire County Council to the office as independent Chairman of the Oxfordshire Local Pension Board.

28/15

Petitions and Public Address

Minutes:

Mr Peter Wallis addressed the Committee on behalf of Fossil Free Oxfordshire and in his capacity as a scheme member of the LGPS, in relation to Agenda Item 8 – Corporate Governance and Socially Responsible Investment.

 

He told the Committee that he had had a number of conversations with a number of his LGPS colleagues who felt as strongly as he about both the ethical and financial implications of how the Pension Fund was invested.

He pointed out that, in his view, scheme members’ interests included, first ensuring the Fund could pay LGPS members’ pensions on retirement by obtaining good returns and avoiding unduly risky investments; and secondly, investing in a way that protected their other long-term interests, notably giving protection from climate change. He directed the Committee’s attention to the Law Commission’s review which advised that Committee’s may also take into account non-financial factors such as the views of members and quality of life, as long as this did not result in significant financial detriment.

 

Mr Wallis also expressed the view that there was a financial risk associated with fossil fuel investments, pointing out that there was evidence that portfolios containing no fossil fuel holdings could perform just as well as those that included them. He also cited a very recent article in the Telegraph which spoke of a possible draconian ‘tax’ or carbon on carbon emissions which would change the financial; calculus for coal, oil and gas. 

 

Mr Wallis referred to Fossil Free Oxfordshire’s petition to the County Council’s Cabinet in March this year which called for disinvestment from fossil fuels, referring also to the Chief Finance Officer's report which set out an alternative to disinvestment. It set out a commitment to hold fund managers to the checklist in the Carbon Trackers transition blueprint which amounted to a process of rigorous engagement with the fossil fuel industry such as to bring about a rapid change in how energy is generated and used. As a scheme member he urged the Committee to provide the evidence from the fund managers that each of the fossil fuel companies they invested in were taking management actions in light of the comprehensive risk assessment completed in line with the Blueprint Checklist and were making decisions to exclude or include companies on this basis.

 

In conclusion he stressed that Fossil Free Oxfordshire were not asking the Committee to sacrifice the profitability of the pension fund for their principles, but asking the Committee to move investments away from fossil fuel companies that were not carrying out their business in a manner consistent with the Transition Blueprint checklist.

 

There followed a question and answer session with the speaker and his colleagues from Fossil Free Oxfordshire. Issues explored were as follows:

 

-       A member of the Committee asked if there was a need to take action overnight given that as time went on and the fossil fuel industry declined, there would be a rapid pace of change to find new alternatives. A Fossil Free spokesperson responded that  ...  view the full minutes text for item 28/15

29/15

Corporate Governance and Socially Responsible Investment pdf icon PDF 89 KB

10:20

 

This item covers any issues concerning Corporate Governance and Socially Responsible Investment which need to be brought to the attention of the Committee. It includes a discussion on the key issues being raised in the debate about future investments in fossil fuel companies, and reviews the Committee's current approach in respect of the guidance it provides to its Fund Managers.

 

Members will recall that Professor Allport gave an address to the Committee in December of last year on Fossil Fuel Investment. As a result a report was commissioned from UBS and was submitted for consideration to the last meeting in March. Since then a petition was submitted to Cabinet and it was requested that it be sent to all members of this Committee. The petition’s rationale is duly attached at PF7 together with a report from the officers (PF7). A full copy of the petition will be available to view at the meeting.

 

The Committee is RECOMMENDED to note the content of the report, and endorse the current Statement of Investment Principles in respect of Corporate Governance and Socially Responsible Investment.

 

Additional documents:

Minutes:

 

 

Following the above question and answer session with the speaker and his accompanying supporters from Fossil Free Oxfordshire, the Committee now had before them the report of the Chief Finance Officer which had been produced with regard to the significant media interest in the issue of the Committee’s investment in fossil fuel companies and in light of the action taken by the Committee at its December 2014 and March 2015 meeting. The report PF7) covered the main issues raised and asked the Committee to review its Statement of Investment Principles accordingly, and to determine whether any changes were necessary.

 

Members of the Committee agreed that it had been useful to hear and to discuss the counter arguments to the Committee’s view that its sole responsibility was to invest in the best interests of the Fund’s employing bodies and beneficiaries, whatever the views of each member were on climate change. They also agreed that they had in fact taken the matter up with its investment managers, two of whom had reported at length on the subject at previous meetings and the Committee had also had the legal opinion before them from Nigel Giffin QC. Members did, however, feel that they had perhaps not conveyed this action sufficiently to the public.

 

Following their discussion, the Committee welcomed the views of Fossil Free Oxfordshire, but AGREED to

 

(a)  strongly support the officers recommendation which was to note the content of the report, and endorse the current Statement of Investment Principles in respect of Corporate Governance and Socially Responsible Investment; and

(b)  accept that greater care would be taken in the future to inform the public of previous action taken to make the Committee aware of the issues involved, as detailed in the report PF7.

 

 

 

 

30/15

Management of Pension Fund Deficits pdf icon PDF 93 KB

10:35

 

The report (PF8) discusses the Committee’s approach to the management of the Fund’s deficit, in light of the focus placed on this issue by the Shadow Scheme Advisory Board.

 

The Committee is RECOMMENDED to:

 

(a)  note the report;

 

(b) ask officers to work with the Fund’s Actuary, Barnett Waddingham, to provide a detailed cash flow forecast based on assumed pension liabilities, and known plans of the main employers; and

 

(c)  provide reports to future meetings of this Committee setting out the cash flow projections, and any implications for the current investment strategy and asset allocation. 

 

Minutes:

The Committee discussed their approach to the management of the Fund’s deficit, in light of the focus placed on this issue by the Shadow Scheme Advisory Board (PF8).

 

RESOLVED: to

 

(a)  note the report;

 

(b)  ask the officers to work with the Fund’s Actuary, Barnett Waddingham, to provide a detailed cash flow forecast based on assumed pension liabilities and known plans of the main employers; and to allocate the sum of £4,500 to cover the costs of the report; and

 

(c)  provide reports to future meetings of this Committee setting out the cash flow projections, and any implications for the current investment strategy and asset allocation.

31/15

Employer Management pdf icon PDF 90 KB

10:50

 

The report (PF9) discusses the Committee's approach to the management of employers within the Oxfordshire LGPS Fund.  It builds on the employer risk report presented to the last meeting, and sets out additional indicators to assess the quality of the record keeping within the Fund and the performance of individual employers.

 

The Committee is RECOMMENDED to:

 

(a)  note the report;

 

(b)approve the performance template as contained in Annex 1 as the basis for future reports to this Committee; and

 

(c)  review the Administration Strategy on a regular basis to ensure it supports the developing approach to employer management.

 

 

Additional documents:

Minutes:

The Committee considered a report (PF9) which discussed the Committee’s approach to the management of employers within the Oxfordshire LGPS Fund. The report built on the employer risk report which had been presented to the last meeting, and it set out the additional indicators to assess the quality of the record keeping within the Fund and the performance of individual employers.

 

RESOLVED: to

 

(a)  note the report;

 

(b)  approve the performance template as contained in Annex 1 as the basis for future reports to this Committee; and

 

(c)  review the Administration Strategy on a regular basis to ensure it supports the developing approach to employer management.

 

 

32/15

Future Management Arrangements pdf icon PDF 81 KB

11:05

 

The report (PF10) looks at the potential implications for the management arrangements for the administration and investment functions in light of the new agenda for the service and the transfer of financial services to the Integrated Business Centre in Hampshire.

 

The Committee is RECOMMENDED to note the report and endorse the proposed changes in management arrangements as outlined.

 

 

Minutes:

The Committee had before them a report (PF10) which looked at the potential implications for the management arrangements for the administration and investment functions in light of the new agenda for the service and the transfer of financial services to the Integrated Business Centre in Hampshire.

 

The Committee asked for a diagram of the new structure to be submitted to the next meeting.

 

It was AGREED to note the report and to endorse the proposed changes in management arrangements as outlined.

33/15

Annual Review of Fund Policies pdf icon PDF 86 KB

11.25

 

The report (PF11) provides the annual review of the Fund policies and seeks Committee approval of any changes.

 

The strategy statements and policies are attached as follows:

 

·         Annex 1 - The Funding Strategy Statement

·         Annex 2 – The Statement of Investment Principles

·         Annex 3 – Governance Policy and Governance Compliance Statement

·         Annex 4 – Communication Policy and Annex

·         Annex 5 – Early Release of Deferred Benefits Policy

·         Annex 6 – Scheme of Delegation

·         Annex 7 – Administration Strategy Statement

 

The Committee is RECOMMENDED to approve the revised policy documents as set out in Annexes 1 - 7 to this report, noting the main changes in the documents as discussed above.

 

 

 

Additional documents:

Minutes:

The Committee had before them the Fund Policies and Strategy Statements for annual review (PF11).

 

Members also considered some proposed amendments as submitted by Councillor Nick Hards and shown on the Addenda.

 

RESOLVED: (on a motion by Cllr Richard Langridge duly seconded and carried nem con) to:

 

 

(a)  note the main changes within the policies as set out in the report; and

 

(b)  approve the revised policy documents as set out in Annexes 1 – 7 to this report, subject to the further changes below;

 

(i)    the correction to the table within the Statement of Investment Principles on page 49 of the papers, to Chief Finance Officer, as the Investment Manager for quoted private equity trusts;

 

(ii)  to amend the paragraph on Monitoring and Review in the Statement of Investment Principles (page 51 of the papers) to read “The individual fund manager’s performance, current activity and transactions are monitored on a quarterly basis by the Independent Financial Adviser and the Officers to the Fund, and all issues of concern reported directly to the Committee.  Quarterly reports from all managers are made available to the Committee, who can raise any issues they wish to follow up.  All Managers formally report to the Committee once a year, spread over the four quarterly meetings, with the Committee retaining the right to request more frequent attendance if they have matters of concern.  The investment management performance of the Fund as a whole is reviewed annually by the Committee, supported by a presentation by State Street Global Services”;

 

(iii)to amend the wording of the paragraph on Custody and Stock Lending within the Statement of Investment Principles (page 52 of the papers) to delete the reference to hedge funds, and add a reference to the diversified growth fund to the exceptions of assets not held by the Custodian;

 

(iv)to amend the Governance Compliance StatementPrinciple F (page 61 of the papers) to read that the Fund arranges an Annual Pension Fund Employers Forum, rather than holds, to reflect the fact that the Forum may be cancelled due to lack of employer interest; and

 

(v)  to amend paragraph 9 of the Early Release of Benefits Policy Statement to delete the words “doubtless by all current fund employers”   

 

 

 

 

 

34/15

Employer Update pdf icon PDF 85 KB

11.45

 

The report (PF12) covers the key operational issues around individual employer membership of the Fund, including any new applications for admissions and cessations.

 

 

The Committee is RECOMMENDED to:

 

(a)  note the position regarding the previous applications;

 

(b)note the position regarding new applications for admission;

 

(c)  note the position regarding closure of scheme employers; and

 

(d)confirm the intention that, in the event that Abingdon and Witney College was to cease operations before the completion of the reimbursement arrangements set out following the transfer of adult learning staff, to transfer notional assets from Abingdon and Witney College to the County Council as set out in paragraph 12 above.

 

 

 

Minutes:

The Committee had before them a report (PF12) covering the key operational issues around individual employer membership of the Fund, including any new applications for admissions and cessations.

 

RESOLVED: to

 

(a)  note the position regarding the previous applications;

 

(b)  note the position regarding new applications for admission;

 

(c)  note the position regarding closure of scheme employers; and

 

(d)  confirm the intention that, in the event that Abingdon & Witney College was to cease operations before the completion of the reimbursement arrangements set out following the transfer of adult learning staff, to transfer notional assets from Abingdon & Witney College to the County Council, as set out in paragraph 12 of the report.

35/15

Write Offs pdf icon PDF 37 KB

11.55

 

The report (PF13) provides the Committee with summary details of the amounts written off in the last quarter in accordance with Financial Regulations of the Fund.

 

The Committee is RECOMMENDED to note the report.

Minutes:

The Committee had before them summary details of the amounts written off in the last quarter in accordance with Financial Regulations of the Fund (PF13).

 

RESOLVED: to note the report.

36/15

Overview of Past and Current Investment Position pdf icon PDF 84 KB

12:00

 

Tables 1 and 2 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 March 2015 using the following tables:

 

Table 1

provides a consolidated valuation of the Pension Fund at 31 March 2015

Table 2

shows net investments/disinvestments during the quarter

Tables 3 and 4

provide investment performance for the consolidated Pension Fund for the quarter ended 31 March 2015

Table 5

provides details on the Pension Fund’s top holdings

 

In addition to the above tables, the market value of the Fund over the past three years has been displayed graphically in Graph 1.

 

The Committee is RECOMMENDED to receive the tables and graph, and that the information contained in them be borne in mind, insofar as they relate to items 16, 17 and 18 on the agenda.

Minutes:

The Independent Financial Adviser reviewed the investment activity during the past quarter and presented an overview of the Fund’s position as at 31 March 2015.

 

Mr Davies noted that the overall value of the Fund had risen by £96million over the last quarter.

 

RESOLVED: to receive the tables and graphs and that the information contained in them be borne in mind, , insofar as they relate to items 16, 17 and 18 on the Agenda.

37/15

EXEMPT ITEMS

The Committee is RECOMMENDED that the public be excluded for the duration of items 16, 17, 18, 19, and 20 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 17 and 19, there are no reports circulated with the Agenda. Any exempt information will be reported orally.

Minutes:

The Committee RESOLVED that the public be excluded for the duration of items 16, 17, 18, 19, and 20 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.

 

38/15

Overview and Outlook for Investment Markets pdf icon PDF 330 KB

12:05

 

The report by the Independent Financial Adviser (PF16) 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.

Minutes:

The Committee considered a report of the Independent Financial Adviser (PF16) which gave an overview of the current and future investment scene and market developments across various regions and sectors. The report itself did not contain exempt information and was available to the public.

 

The public was excluded during this item because its discussion in public was 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.

 

RESOLVED: to receive the report, tables and graphs and to bear the Independent Financial Adviser’s conclusions in mind when considering the Fund Managers’ reports.

 

39/15

Insight Investment

12:10

 

The representatives of Insight Investment (Alex Giles, Sherilee Mace and Steve Waddington) will:

 

(a)       present their approach to investments in relation to their part of the Fund and their strategy against the background of the current investment scene;

 

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

 

In support of the above is their report for the period to 31 March 2015.

 

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.

Minutes:

The Independent Financial Adviser reported orally on the performance and strategy of Insight Investment drawing on the tables at Agenda Items 14 and 16.

 

The representatives, Sherilee Mace and Steve Waddington presented their approach to investments in relation to their part of the Fund and their strategy against the background of the current investment scene. They also gave their views on the future investment scene.

 

At the end of the presentation they responded to questions from members.

 

The public were 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.

 

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

 

 

40/15

Report of Main Issues arising from Reports of the Fund Managers not represented at this meeting

12:50

 

The Independent Financial Adviser will report orally on the officer meetings with Baillie Gifford, Legal & General, Wellington and UBS in conjunction with information contained in the tables (Agenda Item 14).

 

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.

Minutes:

The Independent Financial Adviser reported orally on the main issues arising from the officer meetings with Baillie Gifford, Legal & General, Wellington and Partners Group in conjunction with information contained in the tables (Agenda Item 14).

 

The public were 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.

 

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

 

 

41/15

Summary by the Independent Financial Adviser

12:55

 

The Independent Financial Adviser will, if necessary, summarise the foregoing reports of the 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. 

Minutes:

The Independent Financial Adviser reported that no summary was required.

42/15

Additional Voluntary Contribution (AVC) Scheme - Annual Review

13:00

 

The report (PF20) provides the annual review of the Fund’s AVC Scheme, reviewing the performance of Prudential as the scheme manager, and the individual funds available to 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.

 

The Committee is RECOMMENDED to note the report and to confirm the continued use of Prudential as the Council’s AVC provider.

 

 

 

Minutes:

The Committee considered a report (PF20) which gave the annual review of the Fund’s Additional Voluntary Contribution (AVC) Scheme, reviewed the performance of Prudential as the scheme manager, and the individual funds available to members.

 

The public were excluded during this item because its discussion in public was 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.

 

RESOLVED: to note the report and to confirm the continued use of Prudential as the Council’s AVC provider.