Agenda item

The Assistant Investments Manager presented the report and summarized the key facts. The value of the Fund’s assets had fallen by £149m (-6.1%) because equity markets had declined in reaction to fears of a double-dip recession. Over twelve months, however, the value of the assets had risen by £377m (18.6%). In terms of relative performance, the Fund was in line with the average of the WM Local Authority Fund universe. The report from JLT Benefit Solutions had noted that the Fund had benefited from the diversification of asset classes. Rebalancing of equities and corporate bonds had not been triggered during the period. The Financial Reporting Council had published the first Stewardship Code for institutional investors, which would replace the Combined Code. The purpose of the Code was to improve the quality of corporate governance through the promotion of better dialogue between shareholders and company boards and more transparency about the way in which investors oversee companies they own. It was intended to bring a report about the Code to the December meeting of the Committee.

Mr Lyons summarised the key facts in the JLT report. Jupiter’s, three-month performance had outperformed the benchmark, but relative longer-term performance had been disappointing. Jupiter managed an SRI-portfolio, which differed significantly from the benchmark, so that the volatility of returns was expected to be high. Conditions in the past quarter had been very favourable for the smaller companies in the Jupiter portfolio. There had been strong growth in emerging markets and Genesis Global Asset Managers had outperformed the benchmark by 1.6% in the last quarter. He drew attention to the graph on page 18 of the JLT report, which demonstrated that the Fund of Hedge Funds had contributed to a reduction in volatility of returns. A Member commented that the chart only showed the last year and that hedge funds had been very volatile two years ago, so that their performance should be kept under review. Mr Lyons said that the performance of Royal London Asset Management, the only active bond manager used by the Fund, had performed in line with the benchmark and that they had helped mitigate the decline in the performance of equities. The JLT report included qualitative assessments of Schroders and Partners for the first time. Partners had so far invested only £32.3m of the approximately £90m committed to them. However, they had already made distributions. This had been possible because they invested in properties bought at a discount from distressed sellers. Mr Lyons said that diversification of asset classes would be expected to deliver benefits over the long term because it was uncommon for all asset classes to decline in value at the same time.

Members commended Mr Lyons for the quality of the JLT report.

RESOLVED

I. That the last two sentences of paragraph 6.3 of the report be amended as given below by the deletion of the word struck out and the insertion of the words in bold type  

“As part of the valuation process, the Committee will needs to approve the Fund’s Funding Strategy Statement (FSS) which sets out the parameters for the valuation. The proposed FSS was discussed in depth at the Committee workshop held on 23 July 2010 and is included elsewhere on this agenda.”

2. To note the information set out in the report as amended