Home / Committee Minutes / Your Council / Minutes, Meetings and Reports / Committee Minutes / Pension Sub-committee And Pension Board - 15/11/2006

Pension Sub-committee And Pension Board - 15/11/2006

At a MEETING of the SUPERANNUATION INVESTMENT SUB-COMMITTEE of the FINANCE COMMITTEE held at Dundee on 15th November, 2006.

 

Present:-

 

COUNCILLORS

 

Fraser MACPHERSON

Joe MORROW

George REGAN (substitute for BAILIE Charles D P Farquhar)

Nigel DON

Willie SAWERS

Rod WALLACE

 

In attendance:-

 

Mr Willie GOWANS

 

Councillor Fraser MACPHERSON, Convener, in the Chair.

 

Apologies had been received from Mr R McKELVIE.

 

The minute of meeting of this Sub-Committee of 16th August , 2006 was noted.

 

Unless marked thus * all items stand delegated.

 

I PENSIONERS' FORUM

 

Members noted that the Convener chaired a meeting attended by Officers of the Council and pensioner representatives to discuss relevant issues. This was held on 21st September, 2006.

 

The Convener advised that this had been a productive event and it had been agreed to hold this on an annual basis.

 

II SOCIALLY RESPONSIBLE INVESTMENT - SIX MONTHLY REPORT

 

There was submitted Report No 643-2006 by the Head of Finance reviewing the progress by the Fund Managers regarding the positive engagement strategy approved by the Sub-Committee on 23rd February, 2000.

 

The Sub-Committee noted the information contained within this report with regard to the activities of the Fund Managers during the six month period ended 30th September, 2006.

 

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

 

III TAYSIDE SUPERANNUATION FUNDS

 

(i) PERFORMANCE SUMMARIES

 

There was submitted Report No 644-2006 by the Head of Finance relating to Performance Summaries for the quarter, twelve months and three years to 30th September, 2006 reviewing the investment performance of the Main Fund's four Fund Managers (excluding Property) for the quarter to 30th September, 2006. It also considered the performance of the Transport Fund which shared two of these managers.

The report also compared investment performances of the Funds with the Funds' specific benchmarks which consist of various stock market indices.

 

The Sub-Committee noted that in the quarter to 30th September, 2006, the Main Fund return matched the benchmark return. Alliance Bernstein out-performed the benchmark, Goldman Sachs, Fidelity and Baillie Gifford under-performed. The Transport Fund under-performed its benchmark.

 

In the year to 30th September, 2006, the Main Fund return out-performed the benchmark. Alliance Bernstein out-performed, Fidelity matched the benchmark and Baillie Gifford and Goldman Sachs under-performed. The Transport Fund was under its benchmark.

 

In the three years to 30th September, 2006, the Main Fund out-performed its benchmark. Baillie Gifford under-performed. The Transport Fund under-performed its benchmark.

 

The Sub-Committee noted the information contained with the report with regard to the performance of the Tayside Superannuation Fund and Tayside Transport Superannuation Fund and their Fund Managers.

 

(ii) PERFORMANCE SUMMARY (PROPERTY PORTFOLIO)

 

There was submitted Report No 645-2006 by the Head of Finance relating to Schroder Property Investment Management Limited for the quarter, twelve months and three years to 30th September, 2006 reviewing the investment performance of the Property Portfolio managed by Schroder Property Investment Management Limited for the quarter to 30th September, 2006 and for the twelve-month period to the same date.

 

The report also compared investment performances with an appropriate benchmark the HSBC/IPD Pooled Property All Balanced Funds Median from 1st April, 2004. Information prior to this was still compared to the previous HSBC/IPD Pooled Property All Funds Median benchmark.

 

The total portfolio had out-performed the index for the quarter, year and three years and exceeded its target with mixed performances across the range of individual trusts. It was noted that Palmer Active Value exceeded expectations.

 

The Sub-Committee noted the information contained herein with regard to the performance of the Property Portfolio managed by Schroder Property Investment Management Limited.

 

(iii) SUMMARIES OF INVESTMENTS AND TRANSACTIONS

 

There was submitted Report No 646-2006 by the Head of Finance summarising investments and transactions during the period 1st July to 30th September, 2006, reviewing the investment activities of the Main Fund's five Fund Managers for the quarter to 30th September, 2006, summarising the transactions of each Fund Manager and showing the market values of the Main and Transport Fund.

 

The Sub-Committee noted the information contained herein with regard to the activities of the Tayside Superannuation Fund and Tayside Transport Superannuation Fund and their Fund Managers.

 

(iv) QUARTERLY FUNDING REPORT

 

There was submitted Report No 659-2006 by the Head of Finance which considered the report by Barnett Waddington.

 

This report reviewed the current funding level of the Funds as assessed by Barnett Waddingham, the Fund Actuary.

 

The Sub-Committee noted the report by Barnett Waddingham.

IV ADDITIONAL PROPERTY INVESTMENT

 

There was submitted Report No 647-2006 by the Head of Finance considering how the additional allocation of funds to property should be invested to ensure proper diversification of returns.

 

It was noted that discussions with Schroder indicated that there would be a significant increase to UK property exposure and may lead to investing in some areas where values were already high, and that they proposed gaining some exposure to assets outwith the UK. This would be intended to diversify the sources of return as it was considered that the European and UK Property Markets would follow different cycles.

 

For the initial overseas investments it was considered that a broad-based fund of funds was most appropriate.

 

The Sub-Committee approved an investment through Schroder Property in its Continental European Real Estate Fund of Funds. An initial commitment of up to 22m was agreed.

 

V CHANGES TO BOND MANDATE

 

There was submitted Report No 648-2006 by the Head of Finance proposing changes to the Goldman Sachs and Fidelity bond mandates arising from considering how additional return with limited additional risk could be achieved.

 

The Sub-Committee approved the changes to the Goldman Sachs mandate as detailed in Appendix 1 to the report and to the Fidelity mandate as described in Section 8 of the report.

 

VI REVIEW OF STRATEGIC ALLOCATION OF FUND

 

There was submitted Report No 649-2006 by the Head of Finance which considered the report by Hymans Robertson considering the Hymans Robertsons paper 'Review of Strategy and Structure - Implementation Second Supplementary Report Refining the Structure' and possible changes to the asset allocation within the Main Fund.

 

Geoff Singleton of Hymans Robertson noted that although the fund had performed well, the overall performance had been held back by the high UK component.

 

The Sub-Committee approved the structure set out in Appendix 1 to the report, which changed the equity split between UK and Overseas from the current 60:40 to 40:60.

 

VII PRESENTATION

 

Jennifer Youde and Sally Marshall of Goldman Sachs gave a short presentation on their performance. It was reported that the portfolio had under-performed the benchmark for the period to 30th September, 2006, primarily due to a short UK/long Europe 30 year country position. Members further noted that there were some positive performers during this period, notably Royal Sun Alliance and Endurance.

 

Sally Marshall outlined proposals which aimed to achieve a higher return. These included raising the investment objective by increasing the target investment objective from 75bps gross to 125bps gross and proposed changing of the benchmark by simplifying the structure from 5 to 2 indices, which would reduce complexity, lead to a reduction in re-balancing costs and easier performance measurement.

 

The Convener thanked the speakers for their presentation, and it was agreed that officers would continue discussions regarding the proposals.

 

 

 

 

Fraser MACPHERSON, Convener.