Agenda and minutes

The Democratic Services Officer read out the procedure.

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 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 before the meeting to expedite dealing with the item during the meeting.

There were none.

Apologies were received from Tony Earnshaw.

There was none.

There were none.

There were none.

The minutes for the meeting of the 17^th May 2012 were approved as a correct record and signed by the Chair.

The Assistant Investments Manager highlighted the following issues:

·  During the quarter the tactical allocation within the bond portfolio was reversed. In August the spread between gilts and corporate bonds reached the pre-determined trigger point (spread between gilt and corporate bond yields narrows to 120 basis points) for the tactical position to be reversed.  Officers subsequently arranged the sale of £80m of corporate bonds to unwind the tactical allocation.  Having consulted the Investment Consultant, the proceeds were not re-invested into gilts given that gilt yields were (even) lower than when the tactical position was established and the asset allocation between equities and bonds was nearing the lower band of the rebalancing range.  Their advice was to invest the proceeds in global equities (to effect rebalancing policy discussed in section 7).  After transaction costs, the tactical allocation benefitted the Fund by £2.4m when compared to the outcome had the monies remained invested in gilts over the period.

·  MAN remains under close review as they restructure the portfolio after a period of disappointing performance.

·  The Schroder global equity mandate has underperformed over 12 months. Because of the unconstrained nature of the mandate, performance relative to benchmark is expected to be volatile over the short term. Schroder continue to adhere to the approach and philosophy outlined during the tender process. Schroder will be invited to the Panel meeting to be held in 1Q13.

Mr Finch commented that it had been a difficult quarter / last 12 months given the equity markets, recession and austerity measures. He then referred to page 8 of the JLT report (Appendix 2) to highlight the issues in relation to the asset allocation and liability split.

He informed them that based on financial market values, investment returns and cashflows into the Fund, the estimated funding level had slightly decreased over the second quarter of 2012, all else being equal. This was driven by:

·  The fall in the reference yield (-0.3%) used to place a value on the liabilities, is expected, all else being equal, to have led to an increase in their value.

·  The Fund assets producing a negative absolute return.

A Member asked why there had been better results in Quarter 1 of 2012.

Mr Finch replied that it was due to bond yields going up and inflation going down. He added that yields were currently drifting and believed there would be no significant rise in them over the next 3 – 5 years.

A Member asked what impact the new scheme would have on the next valuation.

The Investments Manager anticipated that there would be some savings made, but that they would be smaller than initially thought as accrued benefits will be protected.

Mr Finch referred to page 16 of the JLT report to show that in aggregate, the managers underperformed the customised benchmark over the quarter and year. He added that six of the Managers / Funds had not met their three year performance targets.

A Member commented that Schroder’s performance had been poor over the short  ...  view the full minutes text for item 18.

The Investments Manager introduced this item to the Panel. She confirmed that the Panel were due to meet with TT and Partners in November then Schroder and Man in quarter one of 2013.

The Chairman on behalf of the Panel thanked her for this update.