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.

There were none.

There was none.

There were none.

There were none.

These were approved, subject to the following amendment in Item 27 in the third line of the third paragraph on the second page: “a reasonable term” to be changed to “the minimum term”.

Mr Sheth presented the JLT performance monitoring report for the period to 31 December 2012. He began by summarising the market background. The quarter and the year had been positive for equities. Major factors in stabilising the market had been action taken by the European Central Bank and the unequivocal commitment to save the Euro and quantitative easing in the US to support the mortgage market. In addition companies had strong balance sheets, though there were concerns about the level of profits in difficult trading conditions. UK property had fallen by 3-4% reflecting concerns about the UK economic outlook. Government bonds had ended the year at the same levels as they had started it. The Investments Manager pointed out that index-linked bonds had performed very well. Mr Sheth agreed and said that this was related to changes in the methodology for calculating the Retail Prices Index.

The Chair asked about the implications of the fall in the pound against the Euro since the beginning of the year. Mr Sheth said that governments around the world had an incentive to see the exchange rate of their currency fall in order to boost exports; there were concerns about the ability of the UK Government to pay off debt, which would impact on the value of the pound. The Investments Manager added that markets were increasingly optimistic about the outlook for Europe in 1-2 years, but concerned about the UK, which had hitherto benefitted as a safe haven from the turmoil in Europe. She reminded the Panel that the Fund had a currency hedging mechanism in place and the Fund’s exposure to currency volatility had been reduced.

Mr Sheth drew attention to the table on page 7 of the report (agenda page 21), which set out the Strategy Assumed Return and 3-year Index Return for each asset class. Equities had returned less than assumed, but there had been strong returns from bonds. The performance of overseas fixed interest had been mixed; different countries had performed differently. The Fund of Hedge Funds had performed well below the assumed return; hedge funds had reduced their level of risk. A Member suggested that hedge funds may have performed less well because they had been distracted by corporate activity. The Investments Manager noted that some hedge funds took positions based on strong views of where the market was going. This has led to strong performance by Signet, but Stenham had performed less well. She suggested it would be interesting to probe Man’s views on the market and their strategy.

Mr Sheth said that for bonds the year to date had been a reasonably good one. He then referred to the graphs for aggregate manager performance on page 11 of the report (agenda page 25) and noted the strong performances of Jupiter and RLAM over three years, though RLAM had underperformed slightly in the most recent period. RLAM invests in bonds with lower credit ratings, which the market might see as higher risk.

A Member suggested that the  ...  view the full minutes text for item 36.

The Investments Manager presented the report. The workplan will be updated with projects arising from the Committee’s strategic investment review, which would probably occupy the Panel’s next two meetings. She said that a rota also had to be worked out for meetings with the Fund’s external investment managers.

RESOLVED to recommend the workplan to the Committee.

Following the conclusion of the business of the public meeting, a private meeting was held with two of the Fund’s external investment managers.