Agenda and minutes

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

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 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.

Apologies were received from Cllr Gabriel Batt and Roger Broughton.

There was none.

There was none.

There were none.

The public and exempt minutes of the meeting of 4^th September 2013 were approved as a correct record and signed by the Chair.

Before discussing appendices 3, 4 and 5 of this item, Members are invited to consider the arguments set out in the Public Interest document and to pass the following resolution:

“that the Committee having been satisfied that the public interest would be better served by not disclosing relevant information, the public shall be excluded from the meeting for the duration of the discussion of exempt appendices, 3, 4 and 5 of 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 Part 1 of Schedule 12A of the Act as amended.”

The Assistant Investments Manager presented the report. He said that the Fund had increased by 2.3% over the quarter and had outperformed the strategic benchmark over the quarter and the year. Of the 5 managers rated as Amber in the RAG report (Exempt Appendix 3) 3 had continued to improve, while 2 had deteriorated. He drew attention to the update on the implementation of the investment strategy contained in section 4 of the report. Rebalancing had taken place in the quarter, and overweight equity had been reduced and the proceeds reinvested in corporate bonds.

A Member questioned the statement in paragraph 3.8 at the bottom of agenda page 14 that the issue of the Fund being practically the only investor in the SSgA European fund “was last addressed by the Panel in November 2011”, whereas in fact it had appeared regularly on agendas. The Investments Manager replied that it was not a new issue, though it had been monitored constantly. The Chair agreed with the Member that the issue had been constantly before the Committee.

Mr Finch and Mr Sheth commented on the JLT investment report. Mr Finch noted that MAN was struggling, vindicating the Committee’s decision to disinvest from them, even though JLT had advised at the time holding and watching them a little longer. He said that there were very few negatives over the quarter, apart from emerging markets. Overall managers were doing pretty much what the Fund wanted them to do. Mr Sheth commented on the performance of individual managers.

The Chair asked about the impact of the fall in the dollar. Mr Sheth said that it made some countries’ exports less competitive. Mr Finch, however, said that it had to be remembered that in Asian countries a high proportion of the population was under 25: growth in domestic demand could offset poorer export performance.

A Member noted that Blackrock appeared in the middle of the charts, which seemed natural enough since almost half the Fund was invested in them. Mr Finch said that was how Blackrock was intended to perform and they were performing their expected role. The Blackrock portfolio comprised long-term assets which were fairly static. The Member asked whether it was typical for a local authority pension fund to have this type of dominant portfolio. The investments manager replied that most, but not all, funds had a large passive fund, which helped manage overall investment costs.

The Independent Adviser suggested that the structure of reports should reflect the new investment structure of the Fund. Mr Finch agreed that this was a good idea.

Before discussing the exempt appendices, the Committee RESOLVED

“that having been satisfied that the public interest would be better served by not disclosing relevant information, the public shall be excluded from the meeting for the duration of the discussion of exempt appendices, 3, 4 and 5 of this item, in accordance with the provisions of section 100(A)(4) of the Local Government Act 1972, because of the likely disclosure of  ...  view the full minutes text for item 41.

The Investments Manager presented the report. The Panel was being invited to approve the proposed policy framework. She reminded Members that it had been agreed to take the issue to the full Committee, because Infrastructure would constitute a new asset class. Mr Finch would lead a briefing session before the December meeting of the Committee. There were many different ways of investing in infrastructure, so it was proposed to delegate as much of the detailed decision making to officers and the Panel as possible. If the framework was too prescriptive it would prevent the Fund from taking advantage of available opportunities. Infrastructure was not like the Diversified Growth Fund or Emerging Markets where a fairly tight specification could be drawn up in advance. Mr Finch agreed that infrastructure was a broad category with many access routes. What was the point of having an infrastructure asset class? The answer was to take advantage of its different behaviour, which would provide additional diversification and an ongoing income stream.

The Chair said that there a number of issues to be considered. One was whether to invest in listed or unlisted companies. The other was UK versus global. There seemed to be far greater infrastructure opportunities outside the UK. A Member noted that one of the things the Fund was looking for was inflation protection, which might be easier to secure from UK rather than global assets. The Chair said that a third issue was whether infrastructure investment should be done directly in individual projects, or through a fund of funds structure. The Investments Manager said this would not be specified in advance; a tender would be issued and submissions reviewed. Mr Finch said that a important factor would be when funds were closed; the aim was to get projects going and to start earning returns as soon as possible.

A Member asked about the tender process to be followed. The Investments Manager replied that a significant issue was whether to go through the Official Journal of the European Union (OJEU) process or not. The OJEU process imposed a number of restrictions, such as not be able to respecify at a later stage. The Member said that an issue she would be concerned about would be the level of debt in particular projects. The Assistant Investments Manager suggested that leverage was part of every project. The Member, however, thought that the protection against interest rate changes was required.

A Member raised the possibility of reputational risk, for example through investments that harmed the environment. The Investments Manager responded that once a manager had been appointed, it would not be possible to control what they invested in. The Committee could only exercise control at the tender stage and through the due diligence process. The Head of Business, Finance and Pensions suggested that environmental regulation was so strict that there was little to fear, but the Member felt that this did not apply in emerging markets. The Investments Manager responded that the Fund did not need  ...  view the full minutes text for item 42.

RESOLVED to note the workplan.

The Assistant Investments Manager asked Members to note that, since it had been agreed to meet each of the Fund’s managers every two years, it would be necessary to have more workshops either immediately before or after meetings.