Agenda and minutes

The Democratic Services Officer advised the meeting of the procedure.

Apologies were received from Cheryl Kirby, Wendy Weston and Tony Earnshaw.

The Chair welcomed Cllr Rob Appleyard to his first meeting of the Committee. Cllr Appleyard was replacing Cllr Cherry Beath, who had stepped down to focus on her role as Chair of the Council this year.

At this point in the meeting declarations of interest are received from Members in any of the agenda items under consideration at the meeting. Members are asked to complete the green interest forms circulated to groups in their pre-meetings (which will be announced at the Council Meeting) to indicate:

(a) The agenda item number in which they have an interest to declare.

(b) The nature of their interest.

(c) Whether their interest is a disclosable pecuniary interest or an other interest,  (as defined in Part 2, A and B of the Code of Conduct and Rules for Registration of Interests)

Any Member who needs to clarify any matters relating to the declaration of interests is recommended to seek advice from the Council’s Monitoring Officer or a member of his staff before the meeting to expedite dealing with the item during the meeting.

There were none.

There was none.

There were none.

There were none.

If Members wish to discuss the exempt minutes, they are invited to go into exempt session before they do so.

The public and exempt minutes of 24 March 2017 were approved as a correct record and signed by the Chair.

The Investment Manager presented the report.

She drew Members’ attention to the addition of paragraph (f) in section A of the Governance Compliance Statement:

“The Avon Pension Fund is represented on the governance arrangements of Brunel Pension Partnership.”

She reported that the recruitment of an Independent Member to replace Ann Berresford was in progress.

The Head of Business, Finance and Pensions reminded Members that the term of appointment of the Independent Advisor would end after the Special Meeting on 5^th July 2017. The need for an Independent Advisor would be reviewed at a future date.

It was noted that Steve Paines would succeed Wendy Weston as the Trade Union voting Member with immediate effect.

RESOLVED:

1. To note the roles and responsibilities of the Members, Advisers and Officers.

2. To note the Terms of Reference of the Committee and Investment Panel.

3. To approve the Governance Compliance Statement.

4. To appoint the current Members of the Investment Panel to serve for a further year.

5. To agree that Cllr Steve Pearce, Richard Orton and Cllr Mike Drew should continue to represent the Fund on the Local Authority Pension Fund Forum.

The Investment Manager presented the report.

She reminded Members that the Fund’s accounts formed part of Bath and North East Somerset Council’s accounts, and so would be presented to the Council’s Corporate Audit Committee for approval. Members were therefore invited merely to note the accounts.

The Fund’s assets had increased by £620m over the year because of the rise in the market value of the assets. Management fees had increased because of the rise in the value of the assets. Members asked whether there were alternatives to performance-based managers’ fees. The Investment Manager replied that in the past the Fund had put mandates out to tender on the basis of flat fees, but invariably they would have been more expensive than fee structures related to ‘assets under management’ or performance-based fees, because managers structure the flat fee to protect their income in falling markets . A Member suggested that performance-based fees gave managers an incentive to maximise returns to the Fund. A Member asked whether a ceiling was set on manager fees. The Investment Manager replied thatthere are claw-back arrangements with some managers and in the case of closed end private asset funds such as Partners, fees are only payable when the assets they managed are sold and profits are realised.

RESOLVED to note the draft statement of accounts for the year to 31 March 2017 for audit.

The Committee is invited to go into exempt session before discussing Exempt Appendix 2.

The Assistant Investments Manager presented the report.

There were no decisions by the Panel and no recommendations from it to the Committee.

RESOLVED to note the minutes of the Investment Panel meeting on 24 May at Appendix 1 and the summary of the Meet the Managers Workshop at Exempt Appendix 2.

The Committee is invited to go into exempt session before discussing Exempt Appendix 3.

The Assistant Investments Manager presented the report and summarised the key points.

Over the year the funding level and increased about 10% from 86% to 96%.

This quarter Mercer had provided an Annual Investment Review for the year to 31 March 2017, as had been agreed when the Committee had delegated some investment decisions to the Investment Panel. The Annual Investment Review would provide the background to the strategic investment review, which will be considered at the special meeting of the Committee on 5 July 2017.

FCA had not yet issued details of the opt-out criteria LGPS will need to satisfy in order to be reclassified as a ‘professional counterparty’ from the default position of ‘retail counterparty’ under MIFID II.

Mr Turner commented on the Mercer Annual Investment Review. It was noted that the focus of the review is to reduce equity risk within the portfolio due to the improvement in the funding position.

Before discussing Exempt Appendix 3 to the report the Committee RESOLVED that the public interest would be better served by not disclosing relevant information, and that therefore the public should be excluded from the meeting for the duration of the discussion of Exempt Appendix 3 to this item in accordance with the provisions of section 100(A)(4) of the Local Government Act 1972, because of the likely disclosure of exempt information as defined in paragraph 3 of Schedule 12A of the Act as amended.

RESOLVED:

1. To note the information set out in the report.

2. To note the LAPFF Quarterly Engagement Report at Appendix 4.

RESOLVED that the Committee being satisfied that the public interest would be better served by not disclosing relevant information, that the public should l be excluded for the duration of the discussion of this item and the reporting of this part of the meeting be prevented in accordance with the provisions of section 100(A)(4) of the Local Government Act 1972, because of the likely disclosure of exempt information as defined in paragraph 3 of Part 1 of Scheduled 12A of the Act as amended.

The Council’s Solicitor and Monitoring Officer was present for this item.

The Investment Manager presented the report.

Following discussion it was RESOLVED:

1.  To note the legal agreements pertaining to Brunel Pension Partnership.

2.  To note progress towards establishing BPP Ltd.

3.  To nominate the Chair, Cllr David Veale, as the Committee’s representative to the Oversight Board.

The Pensions Manager presented the report.

RESOLVED to note the report and outcomes from Internal Audit work and the proposed areas to be included in the Bath and North East Somerset Council Audit Plan for 2017/18.

The Technical and Compliance Advisor presented the report.

RESOLVED to note the current position regarding the reconciliation between Avon Pension Fund and HMRC.

The Investment Manager presented the report.

Directly-controlled Administration expenditure was £267,500 below budget, mainly because of lower than budgeted expenditure on salaries due to delays appointing staff following the restructuring of the Administration teams, but also because of the holding over of expenditure on the IT strategy.

As Members were aware, in recent years contributions received had been less than benefits paid, and cash flow was now about £1.5m negative per month. Net cash outflow in 2016/17 was less than forecast because of the factors identified in paragraph 5.2 of the report.

RESOLVED to note:

1.  The administration and management expenditure incurred for the year to 31 March 2017.

2.  The Cash Flow Report for the year to 31 March 2017.

The Pensions Manager presented the report.

A Member expressed concern about the number of outstanding cases and the size of the backlog. The Pensions Manager replied that he was confident that the recent increase in staff resources and IT improvements would be able to reduce these significantly.

RESOLVED to note:

1.  Membership date, Employer Performance and Avon Fund Performance for the 3 months to 31 March 2017.

2.  Progress and reviews of the TPR Data Improvement Plan.

The Technical and Compliance Advisor presented the report.

RESOLVED to note:

1.  The current position regarding the developments that could affect the administration of the Fund.

2.  The current position regarding HM Treasury Exit Payments Legislation and potential timescales.

The Investment Manager presented the report.

She said that the workplan for the Investment Panel appeared light, but additional meetings were about to be arranged.

RESOLVED to note the workplans.