Agenda item

Report attached.

Officers advised the Committee that the net return on the Fund’s investments for the quarter to 31 March 2015 was 4.5%. This represented an out performance of 1.1% against the combined tactical benchmark and an under performance of -0.4% against the strategic benchmark.

The overall net return for the year to 31 March 2015 was 13.2%. This represented an out performance of 1.7% against the tactical combined benchmark and an under performance of -12.9% against the annual strategic benchmark.

1.    Hymans Robertson (HR)

Market Summary

·         Hymans Robertson updated the Committee with a roundup of the market background as at the end of March 2015.

·         Equity markets were buoyant over the quarter, with all main regional indices delivering positive returns. Japan and Europe (ex U.K.) were the stand out performers, returning 16.4% and 10.6% respectively.

·         Yields continued to remain low over the quarter, with longer dated conventional and index linked gilts returning 4.1% and 3.3% respectively.

·         Credit spreads narrowed significantly over the quarter and corporate bonds delivered a return of 3.2%.

·         Property markets, represented by the IPD Monthly property Index, returned 3.0% over the quarter and 18.3& over the last 12 months as investment flows into the asset class continues.

Fund Performance

·         Assets were valued at £573.8m as at 31 March 2015, an increase of £24.9m over the quarter. The total return on the Fund’s assets over the quarter was 4.5%, ahead of the benchmark return of 1.1%

·         Each of the Fund’s mandates produced positive absolute returns over the quarter, with the most significant returns being generated by the Fund’s equity mandates with Baillie Gifford and State Street.

Investment Manager changes

·         During the quarter the Fund invested £100.75m into the GMO Global Return Fund. This was phased over two dealing dates with the first tranche of £50m being invested on 13 January 2015 and the second tranche of £50.75m occurring on 20 January 2015.

·         Also during the quarter, Mike Brooks, one of the portfolio managers for the Baillie Gifford Diversified Growth Fund resigned. Given the team structure employed in managing the fund, Hymans did not believe this would have a material impact on performance prospects and had maintained a “5 – Preferred Manager” rating.

·         The rating for UBS Triton had been upped to “4 – Retain.” This followed a number of changes to the UBS management team , the underlying property portfolio, the fund’s investor base and the overall fund governance structure over the last two years, all of which Hymans believed were positive steps.

2.    Baillie Gifford (BG)

Fiona MacLeod and Paul Morrison attended the meeting to give a presentation on the performance of the Funds mandates in the Baillie Gifford Global Alpha Fund and the Baillie Gifford Diversified Growth Fund.

Since inception in April 2012 the Global Alpha Fund had achieved a return of 18.2% outperforming the benchmark by 2.7%.

Since inception in November 2013 the Diversified Growth Fund had achieved a return of 6.9% per annum outperforming the benchmark by 2.8%.

Both funds had been set targets which they would seek to better over a rolling five year period so it was still early days.

3.    GMO

Tommy Garvey and Helen Roughsedge attended the meeting to deliver a presentation on GMO’s performance since inception. Although the Fund had only recently invested funds with GMO Global Real Return UCITS Fund their performance to date had been encouraging. This performance had been driven by strong equity performance, partially offset by weak fixed income performance.

The Committee noted the reports and presentations.