Agenda item

This report prepared by P-Solve, provides details of the performance and the market value of the Council’s pension fund investments for the quarter ending 31st March 2011.

Simon Jones, P-Solve, introduced the report, which set out the performance of the Pension Fund in the period to 31 March 2011. He said that the period, together with the 12 month period, had seen turbulent market conditions, and this was reflected in performance, though performance against the 3 year benchmark remained strong. With regards to individual mandates, he said that the performance of Majedie and MFS had been below the benchmark for the quarter, while both dynamic asset allocation mandates had also underperformed the benchmark. Within the Matching Fund, performance was as expected, though legal opinion had been received in support of the proposed alteration of the Legal and General Mandate, which would be implemented in the third quarter of the year, subject to negotiation including on the fee structure. The fund value had risen to 604 million by the end of the following period, which ended on the day of the meeting.

The Chairman asked if the underperformance was a blip or part of a trend. Simon Jones said that he believed the effect was temporary, but that some rebalancing from equities might need to be done.

In response to questions from Councillors regarding the benchmark, he said that the benchmark was set above a level of market performance, and most fund managers would not reach or exceed the benchmark. In terms of changing managers, he said that 2 years of quarter-on-quarter underperformance would cause him concern, as investment was best made on a long-term basis, particularly given the time and cost it took to tender a mandate.

Eugenie White said that the benchmark should not be amended because the fund manager holding a mandate failed to reach it, if the Committee was confident that the benchmark had been set correctly, given that it was the basis on which the tender had been awarded, and for which the investment manager was being paid a contract fee. She also said that the fund managers holding the mandates had performed well over a cycle, though did require monitoring. Councillor Iggulden added that the performance of any fund manager should also be measured against their peers.

SheelaSelvajothy, Trade Union Representative, asked what the impact on the fund would be if, following the introduction of increased contributions, there was an increased number of employees leaving the fund. Simon Jones said that quantifying the impact of the changes would be the role of the actuary. Jane West, Director of Financial and Corporate Services, said that public sector pension reform was proposed but still the subject of negotiation, and that an assessment would be made by the actuary of the impact of any changes agreed, and reported to the Committee.

In response to questions from Councillor Ginn and Councillor Murphy, he agreed to supply the Committee with a breakdown of Majedie’s holdings, and with a breakdown of how the fund’s holdings divided by sector. Councillor Murphy also asked if the overall summary could give the 6 month figure, in addition to those already given.

RESOLVED THAT

The report be noted.