Agenda item
Monitoring Report on Fund Activity for the Quarter Ended 30 June 2010
This report provides a summary of fund activity during the quarter ended 30th June 2010. It examines the actions taken, the economic and market background, and investment performance, as well as commenting on events in the quarter.
Reports from Henderson Global Investors and AllianceBernstein are attached separately.
Minutes:
Martin Spriggs introduced the report and confirmed that equity markets had fallen sharply during this quarter. However, a recent revival in equity meant that the Fund’s reported drop in value of £455m to £424.6m had been reversed (to £465m). He advised that the Fund had underperformed both in terms of the benchmark figure and in comparison with other local authorities. This was principally due to underperformance in both asset allocation and stock selection. Members noted that interest rates were likely to remain stable. The Committee were provided with details in respect of asset allocation and investment returns in individual markets. Martin Spriggs reported that the head of Gartmore, Gervais Williams had resigned, however he been replaced by a well qualified and experienced colleague, Adam McConkey. The Council had been reassured that the Gartmore Team remained strong. However, exposure is being reduced as there are wider concerns about the market reaction to the manager leaving and to problems at Gartmore itself.
Valentine Furniss circulated a paper detailing index returns for the period 1 July to 17 September 2010. Valentine Furniss reported that global GDP was forecast to increase by 4.6% for this year and by 4.3% next year. Other positive factors included the fact that exports were quite healthy and there was strong growth in Europe. Problems continued to remain in respect of high national deficits, high rates of unemployment and the collapse of residential property prices. Valentine Furniss felt that a double dip recession and a break-up of the Eurozone were unlikely. Valentine Furness commented that a 7-8% return of the Council’s Pension Fund would be an achievement considering the circumstances this year.
During discussion, Councillor Hashmi commented that IMF had been quite bullish about the UK economy and he sought views with regard to the outcome of the Comprehensive Spending Review (CSR). Councillor Mitchell Murray expressed concerns in respect of the CSR and the prospect of a double dip recession. She also expressed some doubts over India’s economic development. Councillor Crane commented that CSR would affect local authorities and the public sector generally more than the economy overall. The Chair sought views on measures by the USA to ban countries from exporting to them where these countries had deliberately kept their currency value low.
In reply to the issues raised, Valentine Furniss felt that the austerity measures expected in the CSR had been widely reported for some time and that public funded bodies anticipated that further significant savings would be required. He suggested that the positive outcomes would outweigh the negative ones, whilst he remained optimistic about India’s economic growth, stating that the right infrastructure was being put in place and considerable investment continued. Valentine Furniss advised that the USA needed to be mindful in respect of banning exports from other countries, particularly as there were other economies that these countries could turn to. He added that there were various trading groups performing well, including Asia, South America and also the Eurozone to a lesser extent.
Clive Heaphy (Director of Finance and Corporate Resources) added that it would be a few weeks after the announcement of CSR was made before local authorities would be able to assess the impact upon their budgets. He advised that it was likely that sharper and deeper cuts would be made in the early years, whilst spending was likely to increase as the date of the next General Election neared.
RESOLVED:-
that the monitoring report on Fund Activity for the Quarter Ended 30 June 2010 be noted.
Supporting documents: