Issue - meetings

Helen Smith and Simon Jones, P-Solve, introduced the report, which set out the performance of the Council’s Pension Fund in the quarter between . Helen Smith explained the structure of the report, and the way in which it reflected the overall strategy for the fund, and the performance of the four different elements within it.

Councillor Botterill asked whether the element of the fund mandated to Legal and General could be considered to be underperforming. Simon Jones said that the original planned hedging strategy had not been fully implemented, as its cost had risen to be prohibitively high; what had been put in its place was largely a passive holding in long-term gilts. The position was under assessment, and a more detailed evaluation would be available by the next meeting of the Committee.

Councillor Cartwright asked to what extent the Pension Fund was exposed to the consequences of the BP leak in the Gulf of Mexico. Bob Pearce, Group Accountant (Technical), said that the Fund’s exposure had been fractional, with only Majedie having a large holding. Of this, they had sold a large proportion on the day of the explosion, and were holding the remainder, in the belief that the value would eventually rise, at which point they aimed to sell.

Councillor Murphy asked whether the Fund had any potential exposure to the legal problems faced by Goldman Sachs. Simon Jones said that funds such as the Council’s were held in a different organisation to those of Goldman Sachs’ proprietary trading business, meaning that they were protected from the kind of exposure described.

In response to a question from Eugenie White about inflation expectations in the Matching Fund, Simon Jones said that while short-term inflation expectations might be higher, the longer term- expressed as forty to fifty years- was more stable.

Committee Members also asked what were the triggers for corrective action in rebalancing the fund into 25 percent holdings, should one element outperform or underpeform the rest. Councillor Iggulden gave Royal Sun Alliance as an example of an organisation that actively rebalanced its funds when the percentage held changed. Simon Jones said that around ten percent of the target amount allocated (or 2.5 percent of the fund) would be an appropriate trigger. He said that P-Solve and officers would discuss and report to the Committee’s next meeting.

With regard to strategy for emerging market equities, Simon Jones said that there had been changes at MFS who held the mandate in that area. P-Solve were scheduled to meet with the new fund manager at MFS dealing with Global Growth Strategy, and would be able to report outcomes to the September meeting of the Committee.

Eugenie White said that the inception dates for the Barings and Ruffer’s mandates needed to be corrected.

RESOLVED THAT

The report be noted.