Agenda and minutes

To approve as correct the minutes of the meeting held on 25 November 2014 and authorise the Chairman to sign them.

The Minutes of the meeting of the Committee held on 25 November 2014 were agreed as a correct record and signed by the Chairman.

To consider the attached report.

Officers advised the Committee that the net return on the Fund’s investments for the quarter to 30 September 2014 was 2.7%. This represented an out performance of 0.2% against the combined tactical benchmark and an under performance of -4.7% against the strategic benchmark.

The overall net return for the year to 30 September 2014 was 8.6%. This represented a performance in line with the tactical combined benchmark and an out performance of -5.2% against the annual strategic benchmark.

1.    Hymans Robertson(HR)

Market Summary

·         The UK economy continued to recover, with ONS data released in September showing that the UK economy had passed its pre-recession peak. The unemployment rate continued to fall, coming in lower than expected at 6.2% in July – the number of people unemployed had now fallen to below 2 million for the first time since 2008. Across the water, a similarly upbeat picture was being painted by US economic data, with unemployment continuing to fall and third-quarter growth expected to come in around 3% p.a.

·         Short-term interest rates in the UK, US, and Japan remained unchanged. However, the European Central Bank had cut interest rates from 0.15% to 0.05% and slashed the deposit rate for banks to -0.2% in an effort to stimulate the still moribund Eurozone economy and ward off deflation. Over the quarter, Japanese equities had been the standout performer, up 5.9%. However, taking account of currency movements, the US (6.4%) and Emerging Market (3.2%) had delivered the best returns to Sterling investors. Conventional and index-linked gilts remained in positive territory as yields fell, returning 3.7% and 5.9% respectively. Credit spreads widened, resulting in corporate bonds returning 2.9% over the quarter. Property had also continued to post strong returns.

Fund Performance

·         Assets were valued at £529.3m as at 30 September 2014, an increase of £13.0m over the quarter. The total return on the Fund’s assets over the quarter was 2.5%, marginally ahead of the benchmark return of 2.3%.

·         Performance from the Fund’s active equity manager, Baillie Gifford, had detracted from performance as the mandate underperformed its benchmark by 1.2%. Performance from the Multi-asset mandates had been positive with the Baillie Gifford DGF, Barings DAAF and Ruffer Absolute funds all outperforming their respective benchmarks.

Investment manager changes

·         In August, Barings had announced the departure of Percival Stanion (head of the Global Multi-Asset group and lead portfolio manager for the DAA Fund) together with Andrew Cole and Shaniel Ramjee, two other members of the team. Following this, HR had changed their rating of the DAA Fund to “1”-Sell immediately and had advised the Fund to disinvest. Disinvestment had been made on the 29 August 2014 dealing date, with the funds being transferred into the SSgA Sterling Liquidity Fund. Following the quarter end, the Committee had agreed to invest in the GMO Global Real Returns (UCITS) Fund as a replacement for Barings.

Asset Allocation

·         As at the quarter end, the Fund’s direct allocation to equity assets had been slightly overweight target at 26.0%. On a look-through basis,  ...  view the full minutes text for item 22.

To receive the attached report.

The Committee received a report from the Fund’s Actuaries Hymans Robertson estimating the development of the Pension Fund’s funding position from 31 March 2013 to 30 September 2014. The report looked at the whole fund position and did not allow for the circumstances of individual employees.

Employer contributions would not be reviewed until the next valuation as at 31 March 2016. The purpose of the funding update was to assess whether the funding plan was on track and take actions where necessary.

The funding level at the last formal valuation had been 61.2%. As at 30 September 2014 the funding level had increased to 66.8%. This was largely as a result of higher than expected investment returns and an additional cash contribution paid into the fund by the Council in March 2014, principally in relation to the creation of a Local Investment Fund.

Although Assets had increased, liabilities had also increased.

The Committee were satisfied that there was no reason to change the funding plan.