Agenda item
Report from AllianceBernstein Ltd.
Representatives of AllianceBernstein, George Blunden and Antony Bor will attend the meeting for this item.
I have circulated copies of the report from AllianceBernstein Ltd which were separately produced, to members of the Sub-Committee only. Few spare copies are available for inspection. Please contact the Democratic Services Officer on 020 8937 1354 if you wish to inspect any of the reports.
Minutes:
George Blunden (Director, Client relations) and Adrian Brown (Senior Blend Manager) attended the meeting for this item. At the start of the presentation, George Blundell informed the Sub-Committee that he would be retiring at the end of the year and that his replacement would be introduced to the Sub-Committee at the next meeting when AllianceBernstein (AB) would give a presentation. In reference to their report he outlined the factors that had contributed to the underperformance adding that the economic climate in 2008 gave rise to investor fear which drove down equity prices and led many investors to flee from risks. He continued that aware of the fact that long term fundamentals were the main drivers for security pricing, both teams (Value and Growth) had worked to exploit large opportunities and in his view, outperformance had been restored with improved returns in the second and third quarters of 2009. Adrian Brown added out that the cumulative impact of improvements in business and consumer sentiments, a thaw in credit markets as debt issuance and credit spread narrowed had led AB to the conclusion that the economy would achieve a modest economic growth level.
The Chair asked the representatives from AB to explain the time cycle between analysing a particular company and taking the results of their analysis into account in buying stocks of that company. Councillor Detre asked the representatives to explain why AB had fared worse than most fund managers, whether it had lost any local Authority mandate as a result and whether it intended to change its investment strategy as a result of its underperformance. In continuation of his enquiry Councillor Detre asked the representatives to justify why Brent should not terminate its mandate with AB. Adrian Brown stated that over the last year the market had been driven by fear and therefore AB’s analysis of the market had been destabilised. He continued that AB had lost about 5 or 6 out of 35 Local Authority mandates however AB did not plan to change its investment strategy. He stated that by holding on to them, the stocks would return to “favour” as markets stabilised due to less uncertainty, drawing members’ attention to the relevant part of their report on how AB expected to restore Brent’s premium. He continued that as the current portfolio was oddly priced he expected earnings to recover as market anxiety reduced, thus enabling AB to outperform the market in about 3 months.
George Blunden and Adrian Brown were thanked for their presentation.
Members discussed in some detail as to whether AB’s mandate should be halved or possibly terminated due to its consistent underperformance. Martin Spriggs advised members to consider further monitoring of AB’s performance until the end of this year after which period he would submit a report on their performance and setting out options for members’ decision.
RESOLVED:-
that the Head of Exchequer and Investment be requested to monitor the performance of AllianceBernstein until 31/12/09 and to submit a report setting out options for members’ consideration.