Agenda and minutes

To approve as correct the minutes of the meeting held on 20 December 2011 and authorise the Chairman to sign them.

The minutes of the meeting held on 20 December 2011 were agreed as a correct record and signed by the Chairman.

To receive a report from the Council’s External Auditors, PricewaterhouseCoopers (PWC).

The Committee were advised that notification had been received from PricewaterHouseCoopers (PWC) that they would be submitting details of the Pension Fund Audit Plan for 2011/12 to the next meeting of the Committee on 27 June 2012.

The report was noted.

To consider whether the public should now be excluded from the remainder of the meeting on the grounds that it is likely that, in view of the nature of the business to be transacted or the nature of the proceedings, if members of the public were present during those items there would be disclosure to them of exempt information within the meaning of paragraph 1 of Schedule 12A to the Local Government Act 1972; and, if it is decided to exclude the public on those grounds, the Committee to resolve accordingly on the motion of the Chairman.

The Committee resolved to excluded the public from the meeting during discussion of the following item on the grounds that if members of the public were present it was likely that, given the nature of the business to be transacted, that there would be disclosure to them of exempt information within the meaning of paragraph 3 of Schedule 12A to the Local Government Act 1972 which could reveal information relating to the financial or business affairs of any particular person (including the authority holding that information) and it was not in the public interest to publish this information.

Report attached.

Officers provided the Committee with details of how the Pension Fund had performed in the quarter ended 31 December 2011. The net return represented an under performance against the combined tactical benchmark, and an underperformance against the strategic benchmark.

The overall net return for the year to 31 December 2011 also represented an under performance against the annual tactical combined benchmark and an underperformance against the annual strategic benchmark.

The Committee invited Simon Jones, from Hymans Robertson, the Fund’s Pensions Advisers, to report on the performance of the individual Investment Managers.

(a)         Hymans Robertson (HR)

HR informed the Committee that the European debt crisis had been the dominant theme in financial markets during the final three months of 2011. The drama continued unabated and at times came close to stretching the credibility of the euro project t to its limit. Politicians had struggled to agree a suitable policy response as political priorities and allegiances clashed with the needs of monetary union. The Prime Ministers of Greece and Italy were casualties of the pressure placed on Euro member states struggling with unsustainable levels of debt.

In the UK, the Chancellor presented the autumn statement in November. As expected, the essential message was one of continuing ‘austerity’, sluggish economic growth, public sector pay restraint and painful spending cuts. The Chancellor also announced that it would take two years longer than first proposed to eliminate the structural deficit. The Office of Budget Responsibility cut its forecast of economic growth for 2011, to just 0.9% (from 1.7% in March) and to 0.7% for 2012.

Despite all the negative news, equities and bonds each produced strongly positive returns. In the UK, the FTSE All Share index advanced 8.4% during the quarter; fixed interest government bonds returned 5.0% and index linked issues 8.4%. Of the major equity markets, only Japan produced negative returns.

Key events during the quarter:

Global Economy

 • The Bank of England injected an additional £75bn into the economy through quantitative easing (after earlier stimulus of £200bn).

• The UK declined to participate in a plan for closer fiscal union across the European Union.

• Short-term interest rates unchanged in UK and US; reduced, in two stages, in the Euro zone.

• US central bank lowered the cost of short-term $ loans to European Central Bank, to ease liquidity concerns.

• Economic growth in major Asian markets impaired by weak external demand.

Equities

• Strong rebound after sharp falls during preceding quarter.

• The strongest sectors relative to „All World? Index were Oil & Gas (+7.0%) and Industrials (+2.0%); the weakest were Utilities (-4.4%) and Telecoms (-3.5%).

Bonds

• Long dated UK bond yields fell to levels not seen for 60 years as investors sought „safety?.

• Italian ten year bond yield rose above 7% (highest level of Euro era) as debt concerns escalated.

High levels of debt in Europe and in the US threaten the stability of the global economy. Further tough and unpopular action is required to resolve the  ...  view the full minutes text for item 53.