Agenda and minutes

To approve as correct the minutes of the meeting held on 22 June 2011 and authorise the Chairman to sign them.

The minutes of the meeting held on 22 June 2011 were agreed as a correct record and signed by the Chairman.

Report attached

The Committee received a report from officers on the performance of the Havering Pension Fund investments for the quarter ending June 2011.  The net return on the fund’s investments for the quarter was 1.5%, an outperformance of 0.1% against the combined tactical benchmark and an under performance of -1.5% against the strategic benchmark.  The overall net return of the Fund’s investments for the year to 30 June 2011 was 17.4%, this represented an out performance of 0.8% against the annual tactical combined benchmark and an out performance of 11% against the annual strategic benchmark.

(a)               Hymans Robertson (HR)

HR advised the Committee that a dominant theme during the quarter was the debt crisis in Greece and how the matter might be resolved.  Equities fell steeply as the ‘crisis’ reached its peak in mid-June.  This was followed by a sharp rally, late in the quarter, as the European Union and IMF agreed a ‘bail out.’

Data published during the quarter indicated a significant slowdown in economic growth in the US.  In the UK economic growth during the first three months of 2011 (reported in quarter 2) merely offset the contraction recorded in the previous quarter.  Economic strength I Germany and France masked weakness in the other Euro-zone countries. Global inflationary pressures intensified. Adding to the strains on the global economy.

Key events in the quarter were:

Global economy

·        US central bank lowered its forecast for economic growth in 2011 and 2012

·        Short-term interest rates were held in the UK, US and Japan: most increase in euro-zone

·        Rating agencies assigned a negative outlook on US government debt; the political stand-off in agreeing the US debt limit had been unhelpful

·        US confirm the end of its quantitative easing programme (effective end June)

·        Japanese economy contracted for two consecutive quarters.

Equities

·        US equities reached a post ‘crisis’ high in April on strong corporate results

·        The strongest sectors relative to ‘All world’ Index were Health Care (+7.7%) and Consumer Goods (+5.9%); the weakest were Oil & Gas (-5.7%) and Financials/Technology (both -2.7%)

Bonds

·        Index linked gilts outperformed fixed interest issues on concerns over inflation

·        The yield differentials between highly indebted Euro countries and Germany widened further.

Due to economic uncertainty, market expectations for an increase in short-term interest rates had been pushed out, potentially in to 2012, despite inflationary pressures. Indications that the USA might engage in a further round of quantitative easing was a measure of its determination to support the economy if necessary.

HR also advised the Committee that the forecast for quarter 3 was for a further 6% to 7% drop in fund value.

The Committee were informed that the two portfolios with State Street had performed to their respective benchmarks over the quarter. 

The Ruffer mandate had outperformed Libor by 0.9% over the quarter. The portfolio’s returns since inception (a 10 month period) was 5.5% absolute and well ahead of Libor returns. Ruffer had advised HR that Robert (“Viscount”) Tamworth, their Managing Director, would be retiring at  ...  view the full minutes text for item 33.

Report attached

The Committee was presented with an extract of the Council’s Statement of Accounts for the year to 31^st March 2011 showing the accounts of the Havering Pension Fund as at that date. Officers advised the Committee that the Council’s external auditors PricewaterhouseCoopers had raised no significant matters with regard to the Pension Fund accounts.

The Committee were informed of the following key items in the accounts:

·              The Net Assets of the Fund had increased to £388m for 2010/11 from £360m in 2009/10, a net increase of £28m. 

·              The net increase of £28m was compiled of a change in the market value of assets of £14m, investment income of £10m and net additions (cash) of £5m, offset by management expenses of (£1m).

·              The overall return on the Fund’s investments was 6.3%. This was an under performance of -1.9% against the tactical benchmark and an under performance of -3.3% against the strategic benchmark. Although stock market values have risen over the year the markets are still very volatile.

The Committee noted the Havering Pension Fund Accounts as at 31^st March 2011.

Committee were informed that two special meetings of the Committee had been arranged for the 15^th and 16^th December 2011. Both meetings will commence at 2.00pm, the first will consider applications for the position of Active Global Equities Manager and the second applications for the position of Fund Adviser.