MEMORANDUMDate13 July 2010
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INVESTMENT COMMITTEE
15JUNE 2010
MINUTES
ATTENDANCE
MEMBERS OF THE COMMITTEE
P J Bibby, N K Brook (Vice – Chairman), D E Lloyd(Chairman),T W Hone, D Lewis,
Joan Lloyd, S Markiewicz, C A Mitchell, R G Parker.
Officers in Attendance
M Parsons- Director of Resources and Performance
C Cook- Assistant Director (Strategic & Specialist Services)
G Clelland-Chief Finance Officer, Broxbourne Borough Council
N Sykes- HCC Pension Fund Consultant
A Service-Democratic Services Officer
P Towey-Group Manager (Specialist Accounting)
Upon consideration of the Agenda for the Investment Committee meeting on
15June 2010 as circulated, copy annexed, action was taken or decisions were
reached on individual items as recorded below :-
APOLOGY
An apology for absence was submitted on behalf of P V Goggins.
MEMBERSHIP CHANGES
The Executive Member for Resources & Economic Well-Being advised that the County Council at its Annual Meeting on 18 May 2010 had reviewed the Committee membership and considered that the Executive Member for Resources & Economic Well-Being should serve on the Committee as Chairman and consequently appointed him to replace Seamus Quilty. The Council appointed Nigel Brook as Vice Chairman. On behalf of the Committee he thanked Nigel Brook for his chairmanship of the Committee during the last two years which Nigel Brook had done with distinction serving the Hertfordshire pensioners admirably and he was delighted that Nigel Brook would be serving as the Committee Vice Chairman for the coming year.
He thanked Seamus Quilty for his contributions on the Committee during the past years which Seamus Quilty had done with distinction.
Representatives of Hertfordshire District / Borough Councils
He announced that David Lewis, Deputy Leader of Broxbourne Borough Council, had been appointed to replace Ken Ayling as one of the three Hertfordshire District / Borough Councils representatives on the Committee. The remaining vacancy on the Committee was hoping to be filled in the coming weeks.
WELCOME
The Committee Chairman announced that Patrick Towey had been appointed to succeed Nicola Webb as Group Manager (Specialist Accounting) and welcomed him to the first meeting of the Committee. Patrick Towey gave details of his corporate treasury positions he had previously held with Haringey, Barnet and Hertsmere Borough Councils dealing with Pension Funds including a spell with a clearing bank.
DECLARATIONS OF INTEREST BY COMMITTEE MEMBERS
No declarations of interest were made by Committee members in relation to the matters being considered at this meeting.
EXCLUSION OF PRESS AND PUBLIC
That under Section 100 (A) (4) of the Local Government Act 1972, the public be excluded from the meeting for items of business in 1. to 10. below on the grounds that they involve the likely disclosure of exempt information as defined in paragraph 3 of
Part I of Schedule 12 to the said Act.
1.PENSION FUND - SUMMARY STATEMENT AS AT 31MARCH 2010
Nick Sykes and Patrick Towey advised that the last quarter in the stock market had seen an increase in valuations and portfolios in the market with performance matching that. During the last quarter, all Managers had produced positive returns with five Managers [Baillie Gifford, Deutsche, RCM, JPM& BlackRock] matching or exceeding their benchmarks.
It was noted that the 20 largest equity holdings percentages of the Hertfordshire total Fund in the last column of the table in paragraph 7 on page 13 were incorrectly stated.
The Director of Resources and Performance advised that as a consequence of the departure of Nicola Webb it had not proved possible for a report to be produced as intimated at the last meeting reviewingthe investment strategy, in particular, the Fund’s liabilities and such a report would be brought to the Committee’s next meeting in September 2010.
RESOLVED
That (a) the report of the Director of Resources and Performance summarising the investments held at 31 March 2010, which detailed the performance of the Investment Managers during the last financial quarter, year and three year period be noted.
(b) the Director of Resources & Performance be authorised to transfer cash to Investment Manager(s), as and when the pension cash figure is nearing the £20m cap and projected to exceed it. The allocation of funds to investment managers will be either on the basis of recent performance or to bring the Pension Fund closer to its long term strategic allocation, after seeking advice from Mercers, the Pension Fund’s advisers and in consultation with the Chairman of the Investment Committee.
(c)the performance indicators for measuring treasury management performance and activities as set out in paragraph 4.2 of the submitted report be approved.
2.PENSION FUND – THE WM PENSION FUND SERVICE – REPORT ON 2009 / 2010
Elaine Packer from WM Company gave a presentation analysing the performance
of the Council’s Investment Fund Managers during the financial year 2009 / 10.
She advised that during 2009 / 10, the Council’s Investment Managers performance against their set benchmarks with the previous year’s performance shown in brackets was as follows: -
Target Actual Out/Under
outperformance performance
Baillie Gifford+ 1.25%- 5.1%(+4.4%)
Jupiter Asset Mngt+ 2.0% - 6.6 %(-1.0 %)
Alliance Bernstein+ 2.0% -1.3 %(- 11.3 %)
BlackRock+ 0.5%+1.3 %(- 0.8 %)
Deutsche*+ 4.0%+8.1 %
RCM*+ 3.0%-6.0 %
JP Morgan*+ 4.0%+1.1 %
[* Managers engaged from 28 May 2008]
In response to questions, she advised that the longer term returns expectation was 6.75% per annum. The Council’s Consultant felt that this was ambitious and expected the next ten years to become more difficult especially for the equity market.
Elaine Packer felt that active managers can add value to Pension Funds although at times of difficult market conditions this might not prove to be the case. The Council’s Consultant felt that especially as the UK Market basically consisted of 12 /13 large companies consideration be given the use of passive managers rather than active managers when appropriate.
Elaine Packer stated that she would forward information concerning active and passive managers to Patrick Towey for circulation to Committee Members.
RESOLVED
That WM Company’s report on the performance of the Council’s engaged
Investment Managers during 2009 / 10 be noted.
[Representatives of the Council’s Investments managers exited from the meeting
prior to the start of Item 3]
3.PENSION FUND –-INVESTMENT MANAGER'S REPORT - (HARBOUR VEST INVESTMENTS) – PRIVATE EQUITY PORTFOLIO FOR THE PERIOD UP TO
31 MARCH 2010
Kathleen Bacon and Hannah Tobin from Harbour Vest Investments attended the meeting and advised of the activities undertaken on behalf of the Pension Fund over the past years and informed of the Manager's expectations together with their anticipated policy for the future.
RESOLVED
That the report of Harbour Vest Investments be noted.
[Harbour Vest Investments two managers exited from the meeting at this point.]
4.PENSION FUND - INVESTMENT MANAGER’S REPORT (J P MORGAN INVESTMENT MANAGEMENT PORTFOLIO) FOR THE QUARTER ENDING
31MARCH 2010
RESOLVED
That the report of J P Morgan Investment Managementbe noted.
5.PENSION FUND - INVESTMENT MANAGER'S REPORT (RCM INVESTMENT MANAGEMENT PORTFOLIO) - FOR THE QUARTER ENDING 31 MARCH 2010
RESOLVED
That the report of RCM Investment Management be noted.
6.PENSION FUND –-INVESTMENT MANAGER’S REPORT (BLACKROCK PORTFOLIO) FOR THE QUARTER ENDING 31 MARCH 2010
RESOLVED
That the report of BlackRock be noted.
7.PENSION FUND - INVESTMENT MANAGER’S REPORT (BAILLIE GIFFORD PORTFOLIO) FOR THE QUARTER ENDING 31 MARCH 2010
RESOLVED
That the report of Baillie Gifford be noted.
8.PENSION FUND - INVESTMENT MANAGER’S REPORT(JUPITER ASSET MANAGEMENT PORTFOLIO) FOR THE QUARTER ENDING 31 MARCH 2010
RESOLVED
That the report of Jupiter Asset Management be noted.
9.PENSION FUND - INVESTMENT MANAGER'S REPORT (DEUTSCHE INVESTMENT MANAGEMENT PORTFOLIO) - FOR THE QUARTER ENDING31 MARCH 2010
RESOLVED
That the report of Deutsche Investment Management be noted.
10.PENSION FUND - INVESTMENT MANAGER'S REPORT (ALLIANCE BERNSTEIN PORTFOLIO) - FOR THE QUARTER ENDING31 MARCH 2010
RESOLVED
That the report of Alliance Bernstein Institutional Investment be noted.
11.MINUTES
The Minutes of the meeting of the Investment Committee held on 10March 2010 were confirmed as an accurate record.
12.REVIEW OF PENSION FUND ADMINISTRATION
The Directorof Resources and Performancesubmitted a report outlining the working administration arrangements for the Hertfordshire Pension Fund, in particular changes and what had occurred in the last three months since the Committee meeting on 2March 2010.
Membership of the Fund was as follows : -
Type of members / as at31 January 2010 / as at
31April 2010 / Change during last quarter
Active contributing members / 28,351 / 28,610 / 259 [0.9%]
Deferred members / 23,638 / 23,980 / 342[1.4%]
Pensioners / 19,824 / 19,992 / 168 [0.8%]
Total Membership / 71,813 / 72,582 / 769 [1.1%]
The Group Manager (Specialist Accounting) stated that the number of late payments had continued to reduce from 9 to 8 employers for the last quarter.
The 8 outstanding payments had been received.
The need to monitor the habitual late payers was expressed with a view to ameliorating the problem.
He stated that the number of processes outstanding by SERCO had reduced by 500 to 1,497 in the last quarter.
It was suggested that as informationon the age of outstanding processes was not available that any improvement may not reflect the position on more complex cases. Members wished to see information on the number and age of queries outstanding.
The Assistant Director (Strategic & Specialist Services) stated that it was hoped to include in the new procurement contract targets / performance indicators for handling these processes with the preferred bidder for the new contract likely to be determined in September 2010 and the new contract starting in April 2011.
The Committee Chairman suggested that SERCO officer(s) should be asked to attend a future meeting to talk about pension fund administration issues which may identify issues requiring attention. He suggested that within the proposed performance indicators to be formulated there should be one for cleanliness of the data and a cap on earnings to reflect poor performance.
The Committee Chairman suggested that Committee members should read all the details concerning the administration of the pension scheme to get a better insight of what benefits the Council’s pensioners are expected to receive in return for their contributions.
RESOLVED
That (a) the report reviewing administration issues of the Hertfordshire Pension Fund at 30April 2010 be noted.
(b) the key performance indicators for measuring performance and compliance with the administration strategy for the pension fund as set out in Appendix 3 of the submitted report be approved.
(c) the content of future administration review reports contain issues currently being reported plus critical issues that arise.
13PENSION FUND ANNUAL REPORT AND ACCOUNTS 2009/ 2010
The Directorof Resources and Performancesubmitted a report setting out the Pension Fund's Annual Report and Accounts for 2009/ 2010 which were due to be submitted to external Auditors for approval prior to publishing the finalised Accounts and Report and circulating them to pension scheme members.
The Assistant Director (Strategic & Specialist Services) stated that the Pension Accounts were due to be submitted for approval to the Audit Committee at its meeting on 24 June 2010.
The Committee viewed that the Annual report should make reference to longevity and the likelihood of this factor continuing and the consequences on the Pension Fund.
RESOLVED
That (a) the Statement of Investment Principles as contained in the submitted report [pages 52 to 61] be approved
(b) the Pension Fund Annual Report for 2009 / 10 be approved,
(c) the Audit Committee be recommended to approve the Pension Fund and Accounts for 2009 / 2010, and
(d) the Director of Resources and Performance and Committee Chairman be authorised to sign the letter to be sent to the District Auditor confirming the basis on which the Accounts were prepared and that all necessary disclosures had been made.
14.AUDIT OPINION PLAN AND AUDIT FEES FOR 2009 / 10 AND 2010 / 11
Mark Hodgson, the District Auditor, Audit Commission accompanied by Penny Irwin, Audit Manager advised the Committee of the Audit Commission’sproposed plan plus fees for auditing the Hertfordshire Pension Fund for 2009 / 10 and 2010 / /11.The plan and fees were as set out in the Audit Commission’s’ letter of 20 May 2010 and Audit Opinion Plan attached as Agenda Item 14.
The Audit Manager drew attention to specific risks identified that needed to be looked into and stated how this was being undertaken. An evaluation of how effective these specific risks were being handled would be reported back to the Committee at its next meeting on 29 September 2010.
RESOLVED
That the Audit Commission’s annual fees for auditing the Hertfordshire Pension Fund for 2009 / 10 and 2010 / 11 of £45,000 be accepted and noted.
15.INVESTMENT COMMITTEE –FORWARD PLAN
The Director of Resources and Performance submitted a report outlining a proposed programme for 2010 /11.
The Committee Chairman expressed the view that the Committee as trustees of the Pension Fund should increase the level of training it received and suggested that from December 2010 onwards Committee meetings should involve morning training sessions provided by one of the Council’s engaged Investment Managers followed by afternoon meetings. To maximise the possibility of high calibre Investment managers being available to perform the training sessions these sessions may need to be held in London. He suggested that Committee members consider
the possibility of some or all future Committee meetings, December 2010 onwards, being held in London when training is to be provided.
A Committee member questioned the need to have all meetings in London given the travelling time etc.
The Committee Chairman suggested that Committee members should give this approach some thought and this could be discussed further at the next Committee meeting.
RESOLVED
That the Committee’s forward plan for the financial year 2010 /11 as set out in the submitted report be approved.
16DATES OF FUTURE MEETINGS
The Committee noted that the dates of future meetings were as follows : -
a)Wednesday 29 September 2010at 10.00 am
b)Wednesday 1 December 2010 at 10.00 am.
c)Wednesday 2 March 2011at 10.00 am
d)Tuesday 14 June 2011 at 10.00 am.
Kathryn Pettitt
Chief Legal Officer
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