Minutes for Pension Fund Investments Panel meeting, May 18 2009, 6.30PM official page

To note the appointment at the special meeting of the Licensing and General Purposes Committee on 11 May 2009 of a Chairman of the Pension Fund Investments Panel for the municipal year 2009/10 or to make such an appointment.

RESOLVED: That the appointment of Councillor Richard Romain as Chairman for the Municipal Year 2009/10, at the meeting of the Special Licensing and General Purposes Committee held on 11 May 2009, be noted.

To note the attendance at this meeting of any duly appointed Reserve Members.

Reserve Members may attend meetings:-

(i)                 to take the place of an ordinary Member for whom they are a reserve;

(ii)               where the ordinary Member will be absent for the whole of the meeting; and

(iii)             the meeting notes at the start of the meeting at the item ‘Reserves’ that the Reserve Member is or will be attending as a reserve;

(iv)              if a Reserve Member whose intention to attend has been noted arrives after the commencement of the meeting, then that Reserve Member can only act as a Member from the start of the next item of business on the agenda after his/her arrival.

RESOLVED:  To note the attendance at this meeting of the following duly appointed Reserve Member:-

Ordinary Member

Reserve Member

Councillor Mano Dharmarajah

Councillor Rekha Shah

To appoint a Vice-Chairman of the Pension Fund Investments Panel for the Municipal Year 2009/10.

RESOLVED:  That Councillor Mano Dharmarajah be appointed Vice‑Chairman of the Panel for the Municipal Year 2009/10.

To appoint Mr Howard Bluston as a non voting co-optee on the Pension Fund Investments Panel for the Municipal Year 2009/10.

RESOLVED:  That Mr Howard Bluston be appointed the non‑voting co‑optee on the Panel for the Municipal Year 2009/10.

To receive declarations of personal or prejudicial interests, arising from business to be transacted at this meeting, from:

(a)               all Members of the Committee, Sub Committee, Panel or Forum;

(b)               all other Members present in any part of the room or chamber.

RESOLVED:  To note that there were no declarations of interests made by Members in relation to the business to be transacted at this meeting.

That the minutes of the meeting held on 9 March 2009 be taken as read and signed as a correct record.

RESOLVED:  That the minutes of the meeting held on 9 March 2009 be taken as read and signed as a correct record.

To receive questions (if any) from local residents or organisations under the provisions of Committee Procedure Rule 19 (Part 4B of the Constitution).

RESOLVED:  To note that no public questions were put, or petitions or deputations received at this meeting under the provisions of Committee Procedure Rules 19, 16 and 17 respectively.

To resolve that the press and public be excluded from the meeting for the following items of business, on the grounds that they involve the likely disclosure of confidential information in breach of an obligation of confidence, or of exempt information as defined in Part I of Schedule 12A to the Local Government Act 1972:

Agenda Item No

Title

Description of Exempt Information

Information under paragraph 3 of Part I of Schedule 12A to the Local Government Act 1972, relating to the financial or business affairs of any particular person (including the authority holding that information).

Information under paragraph 1 of Part I of Schedule 12A to the Local Government Act 1972, relating to any individual.

RESOLVED:  That the press and public be excluded from the meeting for the following items set out below, as they contained information under Paragraph 3 (relating to the financial or business affairs of any particular person including the authority holding that information) of Part I of Schedule 12A to the Local Government Act 1972:

Item

Title

12.

Presentation by Statestreet.

13.

Performance of Fund Managers – Quarter Ending 31 March 2009.

14.

Selection of Global Equity Managers.

Report of the Corporate Director of Finance.

The Corporate Director of Finance introduced a report which outlined recommendations made by officers on awarding the passive UK Equity Mandate to a fund manager.  The Corporate Director explained that officers had interviewed 3 leading fund managers and felt that they were all capable of being appointed.  However StateStreet had provided a good presentation and additionally offered support to Members of the Panel through training.  StateStreet had been invited to submit a presentation to the Panel to seek their views on the fund manager.

The Panel received the presentation from representatives on behalf of StateStreet.  The representatives outlined the structure of their organisation and explained that it was structured to accommodate institutional investors.  They explained that there was a large team dedicated to passive management.

The representatives provided an outline of the team managing index strategies and the scale of the business in terms of its assets.  It employed a team approach and had customers who had a relationship with StateStreet for over 20 years.  They commented that StateStreet had a good reputation and a good track record.  Additionally StateStreet offered a series of investor insight events which provided clients with information and views on market events which were generally well attended.

The representatives additionally referred to the processes employed to achieve index returns.  They also referred to processes employed to minimise transaction costs and in particular keeping costs down through the payment of lower commission rates when buying or selling securities.

During the discussion on this item, Members and officers raised a number of issues which the representatives responded to as follows:

·                     if assets needed to be sold, it would take approximately 3 working days for settlement to be finalised.  StateStreet worked hard to maximise the money earned by clients;

·                     if StateStreet took over an existing portfolio, it would also take over the existing securities where possible and cost effective for the client;

·                     StateStreet had a strong culture of controlling risks and as part of this they did investigate past issues and lessons learnt for the future;

·                     StateStreet managed index funds in a pragmatic and realistic way.  Changes to the index usually followed a predictable pattern;

·                     stock lending did have a risk factor, however if managed in a risk aware environment they believed that the additional returns that could be achieved were worthwhile;

·                     the money invested by the Council would be ringfenced from the funds available to StateStreet;

·                     StateStreet followed the Combined Code in relation to its governance arrangements.  Votes in relation to relevant issues were recorded and could be provided to the Council, especially in circumstances where they contradicted Directors’ recommendations.  The representatives undertook to inform the Council when votes were made against Directors’ recommendations;

·                     the value of the fund could be accessed online.  The representatives would make arrangements for Members to have access to this.

RESOLVED:  That the appointment of StateStreet Global Advisers to manage the Council’s passive UK Equity Mandate, be agreed.

Report of the Corporate Director of Finance.

The Panel received a report which outlined the performance of pension fund managers for the quarter ending 31 March 2009.  The adviser to the Panel introduced the report and explained that the first quarter had been a difficult period with the equity market falling.  However, markets had improved significantly since the end of the quarter reported with equities rising substantially from the low points in early March 2009.  The adviser commented that in his opinion, recovery was unlikely to be sustainable in the short term.

The adviser provided an outline of the performance of each individual manager.  He reported that one fund manager had outperformed its benchmark objective.  In relation to another fund manager he stated that they had experienced positive returns however, he still did not have confidence in them and their ability to achieve positive stock selection over the long term.  One fund manager had again failed to provide their performance report in time.  The Corporate Director of Finance agreed to write to the relevant fund manager requesting an explanation.

In relation to the currency fund managers, one reported a disappointing return.  They had taken the level of risk down substantially however, it was anticipated that for the current quarter, it would produce a positive return.  The other currency fund manager had performed better delivering a positive return.  The advisers still had confidence in both currency fund managers.

During the discussion on this item, Members raised a number of issues which officers and the adviser to the Panel responded to as follows:

·                     the current events taking place in the markets had led to a lack of fundamental market behaviour, which was making it difficult for active management;

·                     some figures detailed in the report had to be checked and verified.  Additionally a figure which indicated that a significant contribution had been provided to a currency fund manager, would be explained to Members after the meeting.

RESOLVED:  That the report be noted.

Report of the Corporate Director of Finance.

The Chairman introduced a report which outlined the selection process employed by officers to appoint global equity managers on behalf of the Council.  The Chairman explained that the Vice‑Chairman and Co‑optee to the Panel were both absent from the meeting.  In addition the report had separated potential fund managers into those providing value and growth.  As a result of these circumstances he wished for the Panel to discuss how the report should be progressed.

The Chairman queried whether the item could be deferred.  The Corporate Director of Finance advised that a selection date had been set and various fund managers contacted to establish appointments.  The Chairman proposed that in the interests of fairness, the Chairman and Vice‑Chairman attend a selection day process with officers.  Potential managers would be interviewed and assessed.  The preferred managers would then be identified and presented to a future meeting of the Panel for approval prior to adoption.  Whilst discussing this item, the Panel agreed to the inclusion of an additional fund manager to the shortlist suggested by officers.  A total of 8 managers would be interviewed over a two day period.  The Corporate Director of Finance commented that it was anticipated there would be 2 fund managers selected, one from each day.  The Panel agreed to the proposed format for the selection day process.

The Chairman proposed that the decision of the Panel on how the selection day process would proceed, be communicated to all Members of the Panel.  They should be requested to provide comments by a certain date and if any concerns were raised, a special meeting of the Panel could be arranged to discuss any issues.  The Panel agreed with this proposal.

In response to a query raised by a Member, officers and the adviser to the Panel commented that the weightings provided on the qualitative scoring screen were a standardised approach.  The weightings were established in a scientific way but there were elements of it which were subjective.

RESOLVED:  That (1) the Chairman and Vice-Chairman of the Panel attend a selection day process with officers where potential managers be interviewed and assessed;

(2)  the preferred managers from the selection day process be identified and presented to a future meeting of the Panel for approval prior to adoption;

(3)  all Members of the Panel be informed of the Panel’s decision and requested to provide comments on the proposals.