MEMORANDUM Date 7 January 2010
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To: All Members of theInvestment Committee
Executive Member for Resources &
Economic Well - Being / From: Legal & Member Services
Ask for: Adrian Service
Ext: 25564
Minicom: 6611
My Ref: AS/
Your Ref:
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INVESTMENT COMMITTEE
2 DECEMBER 2009
MINUTES
ATTENDANCE
MEMBERS OF THE COMMITTEE
P J Bibby, N K Brook (Chairman), P V Goggins, T W Hone, Joan Lloyd, S Markiewicz,
C A Mitchell, R G Parker, S Quilty (Vice – Chairman).
Also in attendance
D E Lloyd (Executive Member for Resources and Economic Well - Being)
Officers in Attendance
M Parsons - Director of Resources & Performance
G Clelland - Chief Finance Officer, Broxbourne Borough Council
N Sykes - HCC Pension Fund Consultant
A Service - Democratic Services Officer
N Webb - Group Manager (Specialist Accounting)
Upon consideration of the Agenda for the Investment Committee meeting on
2 December 2009 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 K Ayling.
WELCOME
The Committee Chairman stated that given the Hertfordshire District / Borough Councils were ten of the largest employers engaged with the Hertfordshire Pension Fund their Chief Finance Officers would be invited to attend meetings of the Committee commencing from today’s meeting.
He welcomed Gillian Clelland, Broxbourne Borough Council’s Chief Finance Officer to the meeting.
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 30 SEPTEMBER 2009
Nick Sykes and Nicola Webb 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 [Jupiter, Alliance Bernstein, Deutsche, J P Morgan & BlackRock] matching or exceeding their benchmarks.
Nicola Webb stated that the value of the Herts Pension Fund had increased to £1,942.8 m at 30 September 2009 which was the value of the Fund in June 2008. She stated that the performance figure for Alliance Bernstein shown did not include hedging transactions on behalf of the Fund.
The Committee in light of what occurred in Dubai felt consideration should be given to protective measures in particular a derivative strategy.
It was suggested that the summary table contained in paragraph 2 should in future
contain also the performance in the previous two quarter of all managers.
RESOLVED
That the report of the Director of Resources and Performance summarising the investments held at 30 September 2009, which detailed the performance of the Investment Managers during the last financial quarter, year and three year period be noted.
2. PENSION FUND - INVESTMENT MANAGER’S REPORT (DEUTSCHE INVESTMENT MANAGEMENT PORTFOLIO) FOR THE QUARTER ENDING
30 SEPTEMBER 2009
Oliver Kratz and Ajeet Manjrekar from Deutsche Investment Management attended the meeting and advised of the activities undertaken on behalf of the Pension Fund during the past quarter and informed of the Manager's expectations together with their anticipated policy for the future.
RESOLVED
That the report of Deutsche Investment Management be noted.
[Deutsche’s two managers exited from the meeting at this point and
Baillie Gifford’s two managers then entered the room.]
3. PENSION FUND - INVESTMENT MANAGER’S REPORT (BAILLIE GIFFORD PORTFOLIO) FOR THE QUARTER ENDING 30 SEPTEMBER 2009
Lynn Dewar and Anthony Tait from Baillie Gifford attended the meeting and advised of the activities undertaken on behalf of the Pension Fund during the past quarter and informed of the Manager's expectations together with their anticipated policy for the future.
RESOLVED
That the report of Baillie Gifford be noted.
[Baillie Gifford’s two managers exited from the meeting at this point]
4. PENSION FUND –-INVESTMENT MANAGER'S REPORT - (ALLIANCE BERNSTEIN PORTFOLIO) FOR THE QUARTER ENDING 30 SEPTEMBER 2009
RESOLVED
That the report of Alliance Bernstein Institutional Investment Management be noted.
5. PENSION FUND - INVESTMENT MANAGER’S REPORT (JUPITER ASSET MANAGEMENT PORTFOLIO) FOR THE QUARTER ENDING 30 SEPTEMBER 2009
RESOLVED
That the report of Jupiter Asset Management be noted.
6. PENSION FUND - INVESTMENT MANAGER’S REPORT (J P MORGAN INVESTMENT MANAGEMENT PORTFOLIO) FOR THE QUARTER ENDING
30 SEPTEMBER 2009
RESOLVED
That the report of J P Morgan be noted.
7. PENSION FUND - INVESTMENT MANAGER'S REPORT (RCM INVESTMENT MANAGEMENT PORTFOLIO) - FOR THE QUARTER ENDING 30 SEPTEMBER 2009
RESOLVED
That the report of RCM Investment be noted.
8. PENSION FUND - INVESTMENT MANAGER'S REPORT (BLACKROCK PORTFOLIO) - FOR THE QUARTER ENDING 30 SEPTEMBER 2009
RESOLVED
That the report of BlackRock be noted.
9. PENSION FUND STRUCTURE – PROPERTY MANAGER SELECTION
The Director of Resources and Performance advised following advertisement
and submissions of interest received, a shortlist of four managers had been selected to be invited to attend interviews to become the Council’s Property Investment Manager.
The interviews are proposed to be held on the afternoon of Tuesday 19 January 2010 and he invited the Committee to consider appointing a Sub – Committee
to undertake the interviews.
RESOLVED
That a Sub - Committee of four members comprising of the Committee Chairman
[N K Brook] and Vice Chairman [S Quilty], the Executive Member for Resources and Economic Well - Being and R G Parker be appointed to interview and recommend for appointment a specialist Property Investment Manager. The Council’s Investment Consultant [N Sykes] be requested to assist and advise the Sub – Committee.
10. PENSION FUND – COST OF INVESTMENT MANAGEMENT
The Director of Resources and Performance submitted a report giving a breakdown of all costs involved with investment management of the Hertfordshire Pension Fund during 2008 / 2009.
The Committee noted that the annual total cost of investment management of the Council’s Pension Fund had increased from £11.56 m in 2007 / 2008 to £16. 5m in
2008 / 2009. The Group Manager (Specialist Accounting) highlighted that the increased cost was primarily due to the transitional costs of changing investment managers as part of the restructure agreed in March 2008.
The Committee commented that Brokers Commission charges incurred were high.
It was suggested that the need to continue using the voting advisory services provided by RREV should be considered.
It was suggested that future performance targets should be set to be net rather than gross of charges incurred.
RESOLVED
That the report on all costs involved with the investment management of the Hertfordshire Pension Fund during 2008 / 2009 be noted.
11. MINUTES
That subject to the amendment of Item 2 (Audit Commission Annual Governance Report on Herts Pension Fund Accounts) so that the fifteenth and sixteenth lines read as follows “first bullet point – to not adjust the 2008 / 2009 Accounts and not reimburse £0.48 m audit to the Pension Fund”, the Minutes of the meeting of the Investment Committee held on 17 September 2009 were confirmed as an accurate record.
12. REVIEW OF PENSION FUND ADMINISTRATION
The Director of Resources and Performance submitted 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 17 September 2009.
Membership of the Fund was as follows : -
Type of members / as at31 July 2009 / as at
31 October 2009 / Change during last quarter
Active contributing members / 28,449 / 28,186 / -263 [- 0.9%]
Deferred members / 22,689 / 23,110 / 421 [1.9%]
Pensioners / 19,396* / 19,602 / 206 [1.1%]
Total Membership / 70,534 / 70,898 / 364 [0.5%]
* excluding teachers added years members
The Committee noted the situation as regards outstanding information and late contribution payments from employers engaged within the Fund.
Late contributions from 27 of the 146 Employers engaged within Fund for the period ending 30 September 2009 with 9 of these still outstanding as at
20 November 2009.
The Group Manager (Specialist Accounting) stated that a Pension Administration Strategy had been issued for consultation to all Employers within the Hertfordshire Fund and other stakeholders. To date 23% of those consulted had responded with no adverse response being received to the proposals to penalise those who were late in submitting required information or pension contributions. The proposed strategy if adopted would enable the Council as Pension administrator to impose financial penalties including interest charges on Employers who were late with contributions.
The Committee expressed the view that the majority of the 146 Employers within the Herts Pension Fund scheme probably issued cheques to pay the salaries of their employees each month and could not comprehend why at the same time could not make out cheques to pay their employees pension contributions at the same time. Consequently the imposition of penalties on Employers who were persistently late with contributions would be welcomed and supported. It was concluded that circumstances where costs might be recovered should be more definitively spelt out i.e after 2 or 3 late payments [page 25 of the proposed Pension Administration Strategy Appendix C].
RESOLVED
That (a) subject to a review of the wording of lines 20 to 33 on page 25, the Pension Fund Administration Strategy as set out in Appendix 3 of the submitted agenda report be adopted and brought into effect from
1 January 2010.
(b) the report reviewing administration issues of the Hertfordshire Pension Fund at 31 October 2009 be noted.
13. INVESTMENT COMMITTEE – TRAINING AND INDUCTION FOR MEMBERS
The Committee noted the training seminar to be held this afternoon following this meeting.
14 DATES OF FUTURE MEETINGS
The Committee noted that the dates of future meetings were as follows : -
a) Wednesday 10 March 2010 at 10.00 am.
b) Tuesday 15 June 2010 at 10.00 am.
c) Wednesday 29 September 2010 at 10.00 am.
15. EMPLOYERS ANNUAL MEETING ON 23 MARCH 2010
The Committee Chairman drew attention to the Annual Meeting with Employers being held on Tuesday 23 March 2010 at 10 am at Robertson House, Stevenage and welcomed as many Committee members as possible to attend the meeting.
HERTFORDSHIRE CHIEF FINANCE OFFICER ATTENDANCE AT MEETING
Gillian Clelland stated that she had found the deliberations of the meeting interesting and would advise her fellow Herts District / Borough Council Chief Finance Officers of them in particular payment of pension fund contributions due.
Kathryn Pettitt
Chief Legal Officer
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