Agenda and minutes

An apology for absence was submitted on behalf of Councillor Wade.

Councillors R Gill and Ogungbose joined the meeting late due to other Council and work commitments respectively.  Councillor Douglas took the chair until Councillor R Gill arrived at 4.45pm.

In accordance with the Council’s Constitution, Members are asked to declare any personal or prejudicial interest they may have in any matter which is to be considered at this meeting.

There were no declarations of interest.

The minutes of the meeting on 13 March 2012 were confirmed as correct.

The Panel received the quarterly performance report from the Corporate Director of Finance and Resources for the first quarter period 1 January to 31 March 2012 and the following issues were highlighted:

·  Quarterly Performance - The net total value of the Pension Fund had increased to £584.44m at the end of the quarter period due, in the main, to a net gain on investment values of £24.719m.  The Panel noted the performance data for the respective Fund Managers and asked that future reports include details of the inception dates for each fund.

·  RREEF Property Portfolio Update - Further to Minute 41 of the last meeting, Mark Freeman of Hymans Robertson gave an update on the potential sale by Deutsch Bank of the RREEF property portfolio and advised on the probable valuation of the Council’s investment assuming that the sale to the preferred purchaser went ahead, the likely timescales and the proposed arrangements for Council representatives to meet with the preferred purchaser. 

·  Fund Membership - The Group Manager, Treasury and Pensions, advised on Pension Fund membership as at 31 May 2012 as follows:

Current Members  -  5,086

Deferred Members  -  4,467

Pensioners  -  4,826

·  Scheduled and Admitted Bodies - The Divisional Director of Finance gave an update on the discussions between the Council, Hymans Robertson and Enterprise, the Council’s housing repairs and maintenance contractor, in advance of the expiry of the contract in mid 2013 and the TUPE transfer of staff back to the Council.  The Divisional Director confirmed that the objective was to ensure that Enterprise’s liabilities to the Pension Fund were met up to the same level of the Council’s liabilities.

It was also noted that no further payments had been received, or were expected, from the appointed liquidators of Age Concern.

·  Pension Fund Cash Flow - The Divisional Director of Finance outlined the impact of the increase in pension payments of 5.2%, in line with the Consumer Prices Index, with effect from 9 April 2012 and confirmed that the report requested by Minute 37 (ii) of the last meeting on the Fund’s cash flow position going forward would be presented to the next meeting.

·  LGPS Review Update - The Divisional Director of Finance explained the main elements of the revised LGPS which come into effect from 1 April 2014.

During the course of the discussions, it was acknowledged that the new LGPS arrangements represented an opportunity to promote membership in the scheme.

·  London Pensions Mutual - The Divisional Director of Finance advised that the discussions regarding a potential London Pensions Mutual were unlikely to receive across the board support, although it was likely that there would be greater informal co-operation and collaboration between Councils to achieve efficiencies on Fund investments and management.

Further to Minute 26 (25 October 2011), the Panel received a report on the recommendations from the interview sub-panels in respect of the appointment, subject to completion of the necessary legal checks and further due diligence confirmations, of a Passive Equity manager, two Absolute Return managers and an Infrastructure manager for the Council’s Pension Fund.

The Divisional Director of Finance also referred to the proposed reallocation of assets in the light of new Fund Manager appointments and, to that end, the Panel received a paper from Mark Freeman, Hymans Robertson, setting out the proposed asset allocation which took into account the recommendations of the sub-panels and the performance of existing Fund Managers. 

Mark Freeman explained issues relating to “switch costs” and the likely timetable for implementing the new strategy.  The Panel also discussed issues in respect of Active Global Equities, currency risks associated with global indexes, the weighting of Infrastructure investments to UK projects, the future investment level in the Absolute Return mandates, the need to review relevant Fund Manager benchmarks and the Bond structure.  Officers were asked to report further on these issues as appropriate.

The Panel agreed:

  (i)  The sub-panel recommendations to appoint the following Fund Managers, subject to completion of the necessary legal checks and further due diligence confirmations:

·  UBS Global Asset Management as the Fund’s Passive Equity Manager;

·  Hermes GPE as the Fund’s Infrastructure Manager; and

·  Pyrford International Ltd and Newton Investment Management as the Fund’s Absolute Return Managers.

  (ii)  To note the report by Hymans Robertson on the proposed asset allocation;

 (iii)  To delegate authority to the Corporate Director of Finance and Resources, in consultation with the Chair, to determine the revised asset allocation strategy in the light of the advice from Hymans Robertson and the recommendations of the sub-panels; and

 (iv)  To authorise officers to begin transition work to reflect the new asset allocation strategy.

The Panel agreed to exclude the public and press for the remainder of the meeting by reason of the nature of the business to be discussed which included information exempt from publication by virtue of paragraph 3 of Part 1 of Schedule 12A to the Local Government Act 1972 (as amended).

(* The Chair agreed that this matter could be considered at the meeting as a matter of urgency under the provisions of Section 100B(4)(b) of the Local Government Act 1972.)

The Panel received a presentation from Mr Dusty Amroliwala, Pro Vice-Chancellor at the University of East London, on an outline proposal aimed at assisting the University to manage its ongoing obligations to the Pension Fund through a bespoke investment strategy.

Mr Amroliwala explained that the University’s funding arrangements were to change in the near future and, as a result, it was necessary for the University to consider a range of issues which would enable it to continue as a viable, going concern.  The University’s obligations to the Pension Fund were a major aspect and the downturn in markets over the past few years, coupled with the Council’s investment strategy which had a large focus on equities, placed a significant burden on the University’s balance sheet.  In order to reduce that burden and allow the University to have greater surety over its ongoing obligations, the University had taken professional advice from its appointed Pension Adviser and had identified two alternative investment strategy options which would enable the University to have much greater control of its assets within the overall pension Fund.

Mr Amroliwala advised that, at the current point in time, the University was not seeking any commitment from the Panel as to the way forward but merely wished to make the Panel aware of the issues that it faced and to receive the Panel’s support to the University undertaking more detailed feasibility work with its appointed Pension Adviser and to formally liaise with the Council’s officers and advisers.

Mark Freeman, Hymans Robertson, commented that more and more discussions of this nature were being initiated across the country in view of the changes to funding arrangements for universities and similar organisations and that, as a general principle, any measures to de-risk organisations’ obligations and increase contributions to meet liabilities was encouraged.

The Panel noted the concerns expressed by Bernie Hanreck on behalf of his colleagues at the University and agreed to the progression of discussions between the respective parties, which would be the subject of further reports to the Panel as appropriate.