Pension Sub-committee And Pension Board - 21/11/2001

At a MEETING of the SUPERANNUATION INVESTMENT SUB-COMMITTEE of the FINANCE COMMITTEE held at Dundee on Wednesday, 21st November, 2001.

Present:-

Councillors

In Attendance:-

Mr W GOWANS, Tayside Full-time Trade Union Officers' Group

Councillor REGAN, Convener, in the Chair.

The minute of meeting of this Sub-Committee of 22nd August, 2001 was noted.

Unless marked thus * all items stand delegated.

The Sub-Committee resolved under Section 50(A)(4) of the Local Government (Scotland) Act 1973 that the public and press be excluded from the meeting in order that the undernoted items of business be considered in private on the grounds that they involved the likely disclosure of exempt information as defined in paragraphs 4, 6 and 11 of Part 1 of Schedule 7(A) of the Act.

I TAYSIDE TRANSPORT SUPERANNUATION FUND

(a)WM PERFORMANCE SUMMARIES

There was submitted Report No. 732-2001 by the Director of Finance relating to WM Performance Summaries for both the quarter and year to 30th September 2001.

(b) SUMMARIES OF INVESTMENTS AND TRANSACTIONS

There was submitted Report No. 746-2001 by the Director of Finance summarising investments and transactions during the period 1st July to 30th September 2001.

The Sub-Committee noted information contained herein with regard to the performance of the Transport Fund managed by Schroder Investments Management Limited. Markets had been adversely affected by the events of 11th September 2001 but the position was now improving.

II TAYSIDE SUPERANNUATION FUND

(a) WM PERFORMANCE SUMMARIES (BALANCED PORTFOLIOS)

There was submitted Report No. 733-2001 by the Director of Finance relating to WM Performance Summaries for both the quarter and the year to 30th September 2001.

The Sub-Committee noted that two Fund Managers had out-performed the WM Index for both the quarter and the year to 30th September 2001. The third Fund Manager had under-performed the Index for both the quarter and the year to 30th September 2001. The general picture was one of high negative returns for both the quarter and year to 30th September 2001.

(b) PERFORMANCE SUMMARY (PROPERTY PORTFOLIO)

There was submitted Report No. 734-2001 by the Director of Finance relating to Schroder Property Investment Management Limited performance for both the quarter and the year to 30th September 2001.

The Sub-Committee noted the information contained in the above Report which included the investment performance of the property portfolio managed by Schroder Property Investment Management Limited for the quarter to 30th September 2001 and for the twelve month period to the same date.

(c) SUMMARIES OF INVESTMENTS AND TRANSACTIONS

There was submitted Report No. 745-2001 by the Director of Finance summarising investments and transactions during the period 1st July to 30th September 2001.

III SOCIALLY RESPONSIBLE INVESTMENT - SIX MONTHLY REPORT

There was submitted Report No. 735-2001 by the Director of Finance reviewing implementation by the Fund Managers of the positive engagement strategy approved by the Superannuation Sub Committee on 23rd February 2000. The four action areas identified were Employee Care, Human Rights, Sustainability and the Environment.

Whilst it was too early to see significant results, the Director of Finance pointed out that issues were being raised and he was pleased with each of the Fund Managers' approach.

The Sub-Committee noted the information contained in the Report with regard to the activities of the Fund Managers during the six month period ended 30th September 2001.

IV GLOBAL CUSTODIAN REVIEW

There was submitted Report No. 737-2001 by the Director of Finance updating the Sub-Committee on the short-leet of prospective global custodians as instructed on 20th June 2001. (Report No. 381-2001 refers). Hymans Robertson, the Fund's consultants, had conducted a detailed evaluation of the expressions of interest received and produced an interim report.

The Sub-Committee approved the following recommendations:-

(a) that the Director of Finance visit and interview the short-leet of three custodians as listed in paragraph 8 of the Report.

(b) that the Director of Finance report back to a special meeting of the Sub-Committee convened to appoint a new custodian.

V REVIEW OF TAYSIDE SUPERANNUATION FUND PORTFOLIO ALLOCATION

There was submitted Report No. 738-2001 by the Director of Finance reviewing the allocation of assets between the Fund's three balanced managers to determine whether a more appropriate mix could be achieved to improve the Fund's performance and/or reduce its risk.

The Director of Finance stressed that the proposals would not affect the full review of the Fund's structure to be undertaken during the first six months of the calendar year 2002.

The Sub-Committee approved the transfer of assets under management from Schroders to Baillie Gifford and Fidelity as detailed in Appendix 1 of the Report.

The Director of Finance tabled a note re discussions with Schroders regarding the payment of fees to them.

The Sub-Committee noted the position.

VI PRESENTATION - FIDELITY PENSIONS MANAGEMENT

Mr David Stewart and Mr Peter Yarrow pointed out that Fidelity had outperformed the benchmark over the last quarter, the last year and the last three years. The recent quarter had been unusual with the US terrorist attacks bringing about a fall in the value of the portfolio. The importance of research leading to better stock selection was stressed and the speakers agreed to report back on a socially responsible issue raised by the Convener.

The speakers answered questions and were thanked by the Convener who expressed the Sub-Committee's appreciation of Fidelity's strong performance over the past three years.

VII SCHRODERS INVESTMENT MANAGEMENT

Mr John Troiano, Mr Geoff Day and Mr Nick Purves acknowledged that recent Schroder performances had been disappointing. Personnel changes had also had an adverse affect on the management of the Fund. Separate Fund and UK equity managers had been appointed and a new Chief Executive was now in post. There was a projected performance shortfall of three per cent over the nine months to September 2001 but there were signs of an improved fourth quarter. Schroders were well aware of the need to improve their performance.

The Convener thanked the speakers.

GEORGE REGAN, Convener

APPENDIX III