Agenda and minutes

The Democratic Services Officer read out the procedure.

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Apologies were received from Councillor Gabriel Batt, Councillor Nicholas Coombes and Bill Marshall, for whom Andy Riggs substituted.

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These were approved as a correct record and signed by the Chair.

The Assistant Investments Manager said that although investment report was presented quarterly, it was the yearly and three-yearly performance that was significant for the Fund. Over the year the Fund had earned a return of 16.5%, with positive returns across all asset classes, especially equities. In aggregate the managers had marginally underperformed their benchmarks over the year with underperformance from Jupiter, TT, Stenham and Lyster Watson offsetting positive performance elsewhere in the portfolio. Over the quarter there had been a return of 1.5%, which was in line with the benchmark.

There were three strategic issues to be noted:

1.  The implementation of the currency hedging programme had commenced in July with the appointment of Record as the active currency hedging manager.

2.  The changes to the hedge fund allocations approved by the Committee had been implemented.

3.  Exposure of the Fund to Euro and European financials. This was summarised in Appendix 3 of the report, an updated version of which was tabled.

The Actuary’s quarterly estimate of the funding level of the Fund was 82% as at 30 June 2011.

The Assistant Investments Manager clarified that “ESG” in paragraph 8.2 stood for “environmental, social and governance”.

The Investments Manager said that as the actuary’s estimate of funding level was only received at the end of each quarter, the impact of the latest market turbulence, with yields on gilts at their lowest for a century, was not yet known.

Mr Finch presented the JLT investment review. He said that the report was already outdated to a greater extent than usual, because of market turbulence since 30 June. For example, the report refers to yields on long-term gilts of over 4%, whereas the previous day they had been down to 3.5-3.6%. Current yields on gilts were unprecedented. Markets were concerned that interest rates were likely to remain low for some time. Some time ago fears had been expressed that the UK’s credit rating might be downgraded, but since then debt crises had emerged in Spain, Greece and Portugal, while the UK had persuaded markets that it was addressing its own debt problems, though the rhetoric about this might be tougher than the reality. The Avon Pension Fund was slightly underweighted in equities, so was maybe slightly better placed than other local authority pension funds. Corporate bonds yields had fallen, but not as much as government bonds, and the differential between corporate and government bond yields had increased.

Page 14 of the JLT report gave a snapshot of allocations and values at 30 June 2011. Since then there had been total disinvestment from Lyster Watson and the allocation to Man had been reduced.

The Chair asked about the statement that because of data timing issues returns for the Partners’ portfolio are lagged by a quarter in the performance reports. He was uncomfortable with this, and felt that if the Panel and the Committee were to monitor this portfolio effectively they needed more up-to-date information. He wondered whether Partners could be persuaded to release  ...  view the full minutes text for item 8.