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 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 Ann Berresford.

There was none.

There were none.

There were none.

The public and exempt minutes of the meeting of the 25 May 2016 were approved as a correct record and signed by the Chair.

If the Panel wishes to discuss the contents of Exempt Appendix 3, it should consider passing the following resolution:

The Panel, having been satisfied that the public interest would be better served by not disclosing relevant information, RESOLVES that the public shall be excluded from the meeting while Exempt Appendix 3 to this item is discussed, 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 and summarised the key information. 

• The Fund’s assets had increased by 4.2% in the quarter up to 30^th June. Both equities and bonds had delivered positive returns.

• There was exceptional volatility in financial markets following the Brexit vote on 23^rd June and managers are finding it a challenging environment.

• There were four amber-rated managers. In the case of Invesco the underperformance was largely the result of the effect of a difference in timing of when valuations are made between the fund and the index – when compared on valuations made at the same point in time performance is rated green.

• Because of volatility cash drawdowns were necessary to fund the hedging programme; some of the overweight in corporate bonds (to the value of £60m) was sold in July to maintain a 50% passive hedge level. Mercer continues to recommend a passive currency hedging strategy as set out in Appendix 4.

• IFM drew down $195m of the Fund’s commitment to infrastructure of $300m on 1^st April.

• Work would begin on the search process for an LDI manager, which the Committee had delegated to the Panel and officers, and it was hoped that this would be completed in time for to allow for the Panel’s review of LDI trigger levels to happen at the November meeting.

• A meeting with Standard Life Investments would take place immediately after today’s public meeting of the Panel. A briefing note for this had been circulated to Members.

Mr Giles commented on the executive summary of the Mercer performance report (agenda pages 27-32). He drew attention to the changes of personnel at Blackrock, Genesis and Unigestion. The Panel was asked to note that Mercer had put Standard Life’s Global Absolute Return Strategies Fund (GARS) on Watch status following a review in July. Mr Turner said that Mercer was concerned about the sheer size of this fund, which made it more difficult to manage, though size was not the reason that they were underperforming; this was mainly because of their short US duration and US real yield versus nominal yield strategies. It was possible for a Watch status to be downgraded further; it would take at least two years to reach a proper assessment of their performance. IFM had been downgraded from A to B+ for the reasons stated on agenda page 66.

Mr Turner commented on the Mercer paper on currency hedging (agenda pages 91-93). The Panel accepted the case for continuing the passive hedging strategy.

Mr Turner commented on the Mercer Brexit implications report. He said that the two immediate responses by the Fund should be the continuation of the current approach to currency hedging and the implementation of the risk management framework. Growth asset risk should be reviewed as part of the review of investment strategy in 2017.

RESOLVED to note the information as set out in the reports.

The Investment Manager presented the report.

She suggested that Royal London Asset Management be invited to a future meet the manager session to talk about the gilts markets.

RESOLVED to note the workplan.