Agenda and minutes

To note the appointment of Councillor David Bellotti as Chair of the Panel for the rest of the current Municipal Year.

The Panel noted the appointment of Cllr David Bellotti as Chair of the Panel for the remainder of the Municipal Year.

The Chair will draw attention to the emergency evacuation procedure as set out under Note 9.

The Democratic Services Officer read out the procedure.

There were none.

There were none.

To receive any declarations from Members of the Committee and Officers of personal/prejudicial interests in respect of matters for consideration at this meeting, together with their statements on the nature of any such interest declared.

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

There were none.

To deal with any petitions or questions from Councillors and, where appropriate, co-opted and added members.

There were none.

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

Members are requested to note the recommendation that the Appendix to the report be taken in exempt session.

RESOLVED that having been satisfied that the public interest would be better served by not disclosing relevant information, and in accordance with the provisions of section 100(A)(4) of the Local Government Act 1972, the public be excluded from the meeting for this item of business because of the likely disclosure of exempt information as defined in paragraph 3 of Part 1 of schedule 12A of the Act as amended.

The Investments Manager reminded Members that concerns had been raised at the meeting of the Avon Pension Fund Committee held on 25^th June 2010 that TT International had made several purchases of shares in BP on behalf of the Fund after the Deepwater Horizon blowout and oil spill had occurred. The Committee had agreed to invite TT to submit a written statement setting out the rationale for its decisions and to attend a meeting of the Panel to answer questions.

TT’s statement had been circulated with the agenda. Peter Hunt and Martin Pluck of TT International made a presentation to the Panel and then answered questions.

RESOLVED

(i) that officers should continue to monitor the positions in the oil sector taken on behalf of the Fund by TT;

(ii) that TT should be invited to meet the Panel again within six months;

(iii) that a short report on today’s discussion with TT should be tabled at the next meeting of the Avon Pension Fund Committee on 24^th September 2010.

Members are requested to note the recommendation that Appendix 2 should be taken in exempt session.

Members had met representatives of Schroders and Partners at a private workshop held before today’s meeting.

RESOLVED that the Panel recommends that the Committee:

(i) approves the changes to the IMA guidelines for the property portfolio managed by Partners.

(ii) authorises the Panel to review the property portfolios annually and agree changes to the investment guidelines as appropriate, referring any strategic changes for agreement by the Committee.

The Investments Manager presented the report. She reminded Members that concern had been expressed at the meeting of the Committee on 25^th June 2010 about the proportion of the Funds assets invested passively through BlackRock and about the increased exposure to BP that arose from BlackRock’s mirroring of the index. The core passive investment in BlackRock accounted for 47% of the assets of the Fund.

The report set out three alternative options for reducing the risks to the Fund of the current passive investment portfolio. These were:

1. Reducing the strategic allocation to the regional/country indices in favour of less concentrated global indices.

2. Exploring the use of alternative indices as the benchmark for a passive portfolio.

3. Increasing the allocation to active management in the markets where concentration is an issue, such as the UK.

A Member noted that the information given in the report that in the south west the proportion of Local Government Pension Scheme funds passively managed ranged from 3-37%, which suggested that Avon’s 47% was too high. The Chair observed that the general aim of the Fund was to diversify and spread risk. Members thought it would be helpful to have comparative information about the practice of other local government funds. The Investments Manager noted that some local government funds invested in private equity, which the Avon Fund did not. She emphasised that the risks associated with all investments made by the Fund through managers were managerial and corporate, and that the assets themselves were not at risk because they were ring-fenced.

RESOLVED to request JLT Benefit Solutions to prepare a paper for the next meeting of the Panel on the implications of reducing the concentration in the passive portfolio in accordance with each of the three options identified in the report.  

The Assistant Investments Manager summarized the key figures for the quarter. No issues of significant concern had been identified by JLT, though they had commented that SRI constraints on Jupiter might be at the cost of significant volatility relative to the benchmark. JLT had noted that the Fund had benefited from diversification. At 31^st March 2010 the funding level was 80% of liabilities. MAN had acquired GLG and Jupiter had become a public company.

The Investments Manager briefed Members on information emerging from the Hutton review of public sector pensions. It appeared that the review would not recommend a change from defined benefits to defined contributions. It was also thought to support the capping of the level of defined benefits, pensions based on career average not final salary, and an increase in employee contributions. Any changes would be implemented over two years. The review might also recommend the Government to set a target percentage of GDP for pension liabilities.

RESOLVED to note the report.

A Member asked when the Panel would consider Socially Responsible Investment (SRI). The Investments Manager said that it had not been possible to include this in the current plan because of the amount working required by other issues, in particular hedge funds. She also thought it would be better to defer SRI until after the local elections and the Annual General Meetings of the four Unitary Authorities in May 2011, which might significantly change the membership of the Committee. The new Committee might have different ideas about SRI from those of the current Committee. The Member queried whether this was an adequate reason to defer SRI.

The Panel agreed that SRI should be the first priority of the new Committee.

RESOLVED to agree the workplan and to recommend it to the Committee.

There was none.