Agenda and minutes
Venue: Committee Room 4, Brent Town Hall, Forty Lane, Wembley, HA9 9HD. View directions
Contact: Joe Kwateng, Democratic Services Officer Email: joe.kwateng@brent.gov.uk, (020) 8937 1354
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Declarations of personal and prejudicial interests Members are invited to declare at this stage of the meeting, any relevant financial or other interest in the items on this agenda. |
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Minutes of the previous meeting held on 1 March and 23 March 2011 PDF 101 KB Additional documents: Minutes: RESOLVED:-
(i) that the minutes of the previous meeting held on 1 March 2011 be approved as an accurate record of the meeting
(ii) that the minutes of the meeting held on 23 march 2011 be approved as an accurate record subject to the following amendments in minute 9 paragraph 3; Insert “and autumn” before 2011 (line 2) Delete “should grow” and replace with “would grow slowly” (line 7)
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Matters arising Minutes: In respect of minute 8 of the meeting held on 23 March, the Chair commented on the poor performance of Gartmore Investment Managers and enquired as to whether it was appropriate for the key staff to be retained and investment approach unchanged. Martin Spriggs, Head of Exchequer and Investment responded that reference to staff retention was in respect of managers who were achieving excellent performance for our funds adding that the senior managers who were responsible for Gartmore’s poor performance had all left the firm.
Martin Spriggs advised the Sub-Committee that the pooled emerging markets fund to be managed by Dimensional Fund Advisers would commence around July 2011.
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Deputations (if any) Minutes: None. |
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Report from Legal & General Investment Managers Representatives from Legal & General Investment Management, Julian Harding and Helen Gawkrodger, will attend the meeting for this item.
Minutes: Representatives from Legal and General Investment Management, Helen Gaukrodger (Client Relationship Manager) and Julian Harding (Director, Index Funds) attended the meeting and gave a presentation on the funds mandate and its valuation.
Helen Gaukrodger informed the Sub-Committee that the investment sector fund of the Brent Pension Fund investment mandate was split into 2; hedged and unhedged sectors with a team of specialists monitoring them closely to ensure that their range of deviation did not vary widely from the percentages set. She pointed to the summary of activities and valuation from which members noted that the performance for world developed portfolio and emerging markets portfolio recorded positive returns without transaction costs for the period ending 31 May 2011. She also drew members’ attention to the forthcoming index products and initiatives which included the following; Research on bond indices Frontier markets (less regulated markets, eg. African and Gulf states) Global small cap (medium size companies) Emerging market debt Commodities Diversified growth fund (DGF).
In presenting an outlook for the future, Julian Harding stated that world economic growth would be sluggish chiefly due to oil prices and the events in Japan, a picture which would be mirrored in the UK. He did not expect interest rate rises until sometime next year and in conclusion expressed a pessimistic view over the economy of Greece.
Helen Gaukrodger and Julian Harding were thanked for the presentation.
RESOLVED:
that the report by Legal and General Investment Management be noted. |
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Report from Mellon Asset Management Representatives from Mellon Asset Management, Jonathan Lubran and Tom Salopek, will attend the meeting for this item.
Minutes: Jonathan Lubran (Executive Director of Institutional Business) and Tom Salopek (Senior Portfolio Strategist, London) representatives of Mellon Asset Management were in attendance and made a presentation to the Sub-Committee. Jonathan Lubran informed members that since July 2007, £29m had been invested in Global Tactical Asset Allocation (GTAA) management through a limited liability offshore pooled vehicle with 20% target rate of return. He clarified that the GTAA strategy sought to exploit relative mis-valuations in stock, bond and currency markets both within and across the major developed economies using a quantitative process based on fundamental factors and a highly disciplined objective and systematic approach. It was noted that each of the 4 alpha sources (individual opportunity to make money) had added value to the fund.
Tom Salopek added that the fund had outperformed during the first quarter of 2011. In respect of the market conditions, he added that the global economy was recovering with signs of normalising conditions although the situation on Europe generally was of some concern. In conclusion, Tom Salopek informed members that Mellon Capital saw significant opportunities in 2011 yet remained aware of the macro risk factors. Across countries, divergence in growth trajectories and interest rates continued to drive asset allocation opportunities and that Mellon Capital’s risk management processes remained focussed on the continuing policy and sovereign risks.
In reference to the poor performance figures in 2007/08, Clive Heaphy Director of Finance and Corporate Services stated that the models applied at the time were not robust enough to track the movement of the markets properly. He added that an experience had been learnt and that a more robust model had been developed that had built in signals to track the market and smooth out peaks and troughs.
Jonathan Lubran and Tom Salopek were thanked for the presentation.
RESOLVED:
that report by Mellon Asset Management be noted. |
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Pensions Administration Contract PDF 68 KB This report informs members of the council’s decision to award the pensions administration contract to Capita Hartshead.
Minutes: Andrew Gray, Pensions Administration Manager introduced the report which informed members of the council’s decision to award the pensions administration contract to Capita Hartshead. In setting the background to the award of contract, Andy Gray informed members that the Executive on 15 February 2010 approved proposals for the council’s participation in a collaborative procurement exercise leading to the establishment of a single supplier framework agreement by the London Borough of Hammersmith and Fulham (LBHF) for the provision of services for the administration of the Local Government Pension Scheme (LGPS). Members noted that the Tender Evaluation Panel identified Capita Hartshead as submitting the most economically advantageous tender for appointment to the framework agreement as it scored consistently highly across all quality criteria and also submitted the lowest priced tender.
He highlighted the potential efficiencies and financial savings to local authorities that Framework contracts represented, adding that further economies of scale and savings could be achieved as more councils joined. Andy Gray continued that in the current economic climate with reduced contributors due to increases in redundancies, early retirements and deferred beneficiaries, there was every need to achieve financial savings. He added that the annual savings would be £59,421.
RESOLVED:
that the migration of the pension service to a new contractor, Capita Hartshead, be noted.
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Monitoring report on fund activity for the quarter ended PDF 223 KB This report from the Head of Exchequer and Investment provides information on Brent Pension Fund activity for the quarter ended 31 March 2011 and examines the actions taken, the economic and market background, and investment performance together with comments on events in the quarter.
In relation to this item, I have circulated reports from Henderson Global Investors, Legal & General Managers and Fauchier Partners.
Minutes: Members gave consideration to the report which provided a summary of fund activity during the quarter ended 31st March 2011 as well as examined the actions taken, the economic and market background, and investment performance together with comments on events in the quarter. Martin Spriggs informed members that the Fund had risen in value from £476m to £486m, and outperformed its benchmark over the quarter (+0.3%) as a result of stock selection (outperformance in bonds, infrastructure, GTAA and private equity). The Fund also outperformed the average local authority fund (+0.3%), mainly as a result of good returns in infrastructure and GTAA. Over one year, the Fund has equalled its benchmark (+2.1%) but had underperformed the average fund (-1.5%) as a result of lower exposure to equities / higher exposure to alternative assets and poor performance in global equities, hedge funds and private equity, offset by good performance in GTAA, infrastructure and UK small companies.
He outlined the main changes to the Brent Fund that had occurred as a result of market movements, increased exposure to private equity (£0.8m), property (£1m), GTAA (£2m) and infrastructure (£1.9m). Martin Spriggs continued that since the end of the quarter there had also been further investment in UK property (£0.3m), UK Small companies, infrastructure and private equity. In providing new developments, the Head of Exchequer and Investment informed the Sub-Committee that Henderson Global Investors had completed the takeover of Gartmore Asset Management, although the Gartmore small company team would remain as a discrete unit within Henderson. Members noted that the transfer of emerging market equity investment from LGIM to Dimensional Fund Advisers was expected to occur early in July and the advice by Henderson Global Investors and Capital Dynamics on asset allocation issues. Martin Spriggs also informed members that the infrastructure manager, Alinda, had continued to invest in new assets and improvements to the assets owned predominantly in the USA.
ValentinFurniss the Independent Adviser circulated an updated paper on index returns for the period 31 March to 23 June 2011. He highlighted the volatility of the market and added that inflation would continue to rise due to rising food, oil and gas prices, the increase in Value Added Tax to 20% and the impact of quantitative easing (QE). He added that interest rates may have to rise but that would result in anaemic growth as retail trade suffered and unemployment level continued to rise. The Independent Adviser emphasised the need for the fund to embrace globalisation.
RESOLVED:
that the monitoring report for the quarter ending 31 March 2011 be noted.
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Business and Training Plans for 2010/11 and Business Plans for 2012/14 PDF 77 KB This report outlines the planned activities of the Pension Fund Sub Committee for the year to February 2012, and the three years to February 2014.
Minutes: Marin Spriggs introduced the report that outlined the planned activities of the Pension Fund Sub Committee for the year to February 2012, and the three years to February 2014. He continued that to date there had been training sessions on the Actuarial Valuation, Fixed Interest investment, Investment Management fees and Private Equity with a separate paper on member and officer skills also on the agenda. He advised members that the Business Plan for 2009/10 had been delivered with the exception of pension fund administration and a review of Additional Voluntary Contribution (AVC arrangements which had been put back to 2011.
Marin Spriggs drew members’ attention to the Business Plan for 2011/12 which would cover both regular and other reports / work areas that were anticipated during the year. The programme for the period and subsequent years would be amended frequently in the light of new developments. Clive Heaphy, Director of Finance and Corporate Services added that as pensions were in the forefront it was essential for members’ to receive continuous learning process and in that regard he requested members to identify which areas they would like to receive additional training on.
RESOLVED:
that the report on Business Training Plans for 2011/12 and 2012/14 be noted.
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Pension Funds Accounts 2010/11 PDF 146 KB This report from the Head of Exchequer & Investment sets out the Pension Fund Accounts for the municipal year 2010/11. Minutes: Martin Spriggs Head of Exchequer and Investment in introducing the report on draft 2010/11 informed members that the value of the Fund appeared to have risen however, taking into account pension strain payments (payments to the Fund made by employers over three years to offset the costs of early retirements) of £1,758,000, contributions had fallen by around £800,000. This reflected the large redundancy programmes initiated by employers, pay freezes and declining staff numbers may reduce the value of contributions in future years, though increases in both employer and employee rates may offset such falls. He clarified that the value of benefits payable – both pensions and lump sums had risen sharply (by £4.6m) in 2010/11. In particular, the value of lump sums paid has risen (£3.7m). Staff reductions in 2011/12 were likely to continue this trend.
Martin Spriggs continued that overall, the accounts for 2010/11 indicated a surplus in 2010/11 of £36.7m and on that basis, it was likely that there would be a surplus of income (contributions and investment income) over expenditure. He however cautioned that if rising employee pension fund contribution rates reduced the active membership in the Fund, investment strategy may need to be reviewed.
RESOLVED:
that the Pension Fund Accounts for 2010/11 be noted. |
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Any Other Urgent Business Notice of items to be raised under this heading must be given in writing to the Democratic Services Manager or his representative before the meeting in accordance with Standing Order 64.
Minutes: None. |
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Date of Next Meeting The next meeting of the Brent Pension Fund Sub-Committee is scheduled to take place on Tuesday 27 September 2011 at 6:30pm.
Minutes: The next meeting will take place on Tuesday 27 September 2011. |