Agenda item

The Assistants Investment Manager presented the report and summarised the key facts.  There had been an increase in asset values of 8.1%, driven mainly by the rally in the equity markets. Over the year there had been an increase of 10.8%, to which all asset classes had contributed. Following the decision of the Committee at its meeting on 26 March 2010 to appoint a vote monitoring service, tenders had been invited and the contract had been awarded to Manifest.

Mr Lyons summarised the main points of the JLT performance monitoring report, attached as Appendix 2. He referred to the chart on page 17 of the monitoring report (page 97 of the agenda), which plotted each investment manager’s annual risk against their annual absolute return. The equity managers were well to the right of the chart indicating very high levels of risk, whereas Fund of Hedge Fund managers and property managers were to the left. The location of the total Fund in the middle of the chart showed the benefits of diversification. At the last meeting Members had requested information over a three-year period, and this was provided in the chart on page 18 (agenda page 98). He commented on individual investment managers. Jupiter had underperformed its benchmark over the quarter, but had outperformed it over the year, producing an absolute return of 15.7% over the year. Against this, TT International had outperformed its benchmark over the quarter, but underperformed over the year. The varying performance of these two equity managers showed again the benefits of diversification. State Street had announced that they had acquired Bank of Ireland Asset Management (BIAM). He had no concern about this, as it was a case of a small company being taken over by a much larger one. Genesis had performed above the benchmark; developing markets had been strong over the past three years. Turning to the Fund of Hedge Funds, he said that Lyster Watson had identified that they had some involvement in a hedge fund one of whose managers was under investigation by the financial authorities. Further information was sought from five hedge funds and Lyster Watson established that they had only a very small exposure. Hedge funds were under review by the Investment Panel, and would appear on the agenda of the next meeting of the Panel in January 2011 and on the Committee’s agenda in March 2011.

The Chairman of the Investment Panel noted the comment in paragraph 9.2 of the covering report that the Local Authority Pension Fund Forum (LAPFF) had raised health and safety governance issues with BP as far back as 2006. He said that the Panel had questioned one investment manager very closely about its decision to increase holdings in BP after Deepwater Horizon. He thought that if LAPFF were raising concerns with BP in 2006, a good deal of information about must have circulating about BP then and subsequently and that this should have been reported to the Committee. The Assistant Investment Manager replied that a section on LAPFF had been introduced in the performance report in order to improve the information provided to the Committee about LAPFF activity.

RESOLVED:

1. To note the information as set out in the report.

2. To note the appointment of Manifest to monitor the Fund’s voting activity.