Agenda item

Before discussing appendices 3 and 4 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 and 4 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 highlighted the following:

1. Since the last meeting the Fund had invested in three new managers, two of which would be included in the regular reports from the next meeting, and the third new manager from the following quarter.

2. There were five managers rated as amber in the monitoring report, three of whom were continuing to improve quite strongly. Schroders Global Equity, whom the Panel are due to meet in September, were approaching their 1-year target. Signet had worsened slightly. Gottex were merging with EIM. The Panel would meet both Signet and Gottex after today’s formal meeting.

3. Only one element of the investment strategy changes remained to be implemented, namely the establishment of the infrastructure portfolio. A paper about the tendering process for this appeared later on today’s agenda.

Mr Finch referred to pages 9 and 10 of the JLT performance report and drew attention to the fact that only Partners had underperformed in the quarter, but they had made new investments in this period, and he did not feel there should be concern about them. Genesis had performed extremely well. Over the past three years only three managers had underperformed. TT International had improved significantly over the year.

A Member asked about the hedge funds, all of which had failed to meet their three-year performance targets. Mr Finch thought this was not a cause for alarm, but should be kept under review. The hedge fund industry has had to do a good deal of restructuring since 2008. The Assistants Investments Manager pointed out that there were significant differences between hedge funds in terms of investment strategies, and that they needed to be considered individually.

A Member noted that just as the Fund had selected a manager for its additional emerging markets mandate, fears were being expressed about the future performance of these markets. Mr Finch said that while the Fed’s winding down of quantitative easing had had some impact on emerging markets, he now thought prices were pretty much at the bottom and that he expected to see strong growth in the longer term; he had no concerns about the Fund’s exposure for the longer term.

A Member asked about the impact of currency hedging. The Investments Manager replied that the currency hedges had partially offset the local currency losses.. The Chair suggested that net returns of currency hedging should be given in the performance report. Mr Finch said that this would be done. The Investments Manager reminded Members that the three-year review of currency hedging would begin in September.

In response to a question from a Member, the Assistant Investments Manager said that the allocations listed on page 6 of the JLT report had changed since December, as funds had been moved since then from developed markets into emerging markets. Overall the Fund was still overweight in equities, which would be addressed when investing into Infrastructure later in 2014.

A Member noted that there was no allocation for cash. The Investments Manager replied that cash was used as a working fund for various purposes, including the payment of benefits, and was generally very low.

RESOLVED:

1. To note the report.

2. That there were no issues to be notified to the Committee.