Agenda and minutes
Venue: Room MP702, 7th Floor, Town Hall, Mulberry Place, 5 Clove Crescent, London E14 2BG
Contact: Antonella Burgio, Democratic Services. Tel: 020 7364 4881 E-mail: antonella.burgio@towerhamlets.gov.uk
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APPOINTMENT OF VICE CHAIR To appoint a Vice Chair for the duration of the Municipal year. Minutes: Councillor Claire Harrisson self- nominated and was seconded by Councillors Ayas Miah and Harun Miah. There being no other nominations it was
RESOLVED
That Councillor Claire Harrisson appointed Vice-Chair of Pensions Committee for the duration of the municipal year.
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DECLARATIONS OF DISCLOSABLE PECUNIARY INTEREST PDF 64 KB To note any declarations of interest made by Members, including those restricting Members from voting on the questions detailed in Section 106 of the Local Government Finance Act, 1992. See attached note from the Monitoring Officer.
Minutes: No declarations of disclosable pecuniary interests were made.
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MINUTES OF THE PREVIOUS MEETING(S) PDF 93 KB To confirm as a correct record, the deferred minutes of the Committee on 25 February 2014 and of the Committee held on 16 July 2014.
Additional documents: Minutes: The minutes of the meetings held on 25th February 2014 and 16th of July 2014 were presented for approval.
RESOLVED: 1. That the minutes of 25th February 2014 be approved as a correct record of proceedings. 2. That minutes of the meeting held on 16th July 2014 be approved subject to the following two amendments: · that the attendance at the meeting of Simon Kilby service head of human resources and workforce development be recorded. · that the following sentence at Minute 5 “it was noted that discretion is applied to voluntary retirements but not to employees made redundant” be revised to the following “it was noted that there were actuarial reductions which applied to voluntary redundancies but not to compulsory redundancies.” |
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PETITIONS To receive any petitions Minutes: No requests to present petitions were received. |
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REPORTS FOR CONSIDERATION |
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Disbandment of Pension Fund Investment Panel PDF 66 KB To consider a proposal to stand down the Pension Committee’s Investment Panel. Minutes: The Investment and Treasury Manager Resources, presented the report, recommending that investment advice is provided direct to the Pensions Committee without the need for a separate investment panel. The reasons stated for this recommendation were; · the recommendation had had resulted from ongoing discussions between officers and investment advisers. · the previous structure had been to enable focused investment debate to be undertaken by an investment panel but this had not proved that practical to pursue because of additional demands on Members’ time. · The proposed new committee structure would fit in well with the arrangements that would come about once the pensions boards, proposed in recent Local Government Pension Scheme (LGPS) legislation, had been established.
The Committee also noted that the authority had responded to the recent LGPS consultation
Councillor Harrisson requested that a copy of guidance issued by Council of Independent Financial Advisors (CIPFA) supplementing regulations on best practice in response to the Myners report be provided.
RESOLVED 1. That the Investment Panel be disbanded. 2. That the task of providing quarterly updates on performance and key issues arising out of the quarterly review in a written briefing to Members of the Pensions Committee be delegated to the Acting Corporate Director of Resources. |
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WM Annual Review of Pension Fund Performance 2013/14 PDF 2 MB To receive a presentation from WM Company. Minutes: Lyn Coventry of World Markets (WM) presented the Performance Review of Tower Hamlets and informed the Committee about the work of World Markets. The purpose of the report was to give the Committee an insight into; · economic and market environments · in comparison to other local authorities funds which are monitored through this company
The key points covered in the report were;
· The national picture- in respect of performances of equities, bonds, alternatives and property markets in the short and medium terms. · Average returns between 2013-14 (Section 1 pages 26-30 of agenda pack) · Total Fund performance against Strategic Benchmark (Section 2 pages 31-34 of agenda pack) · Performance of Fund Managers (Section 3 pages 34-35 of agenda pack)
· The Committee were informed that the pacific and emerging markets generated negative returns. The global financial crisis had made an impact with nine percent of returns over the past 5 years.
· The representative from World Markets informed the Committee that volatility rates are lower with bonds as they more consistent and provide greater returns- Only in 3 years had there been negative returns from bonds.
Asset Allocation
· With regards to Asset Allocation the Committee were told from end of March 2014, corporate pension funds were closed to new members, but local government fund is different to this. · The UK was down thirty six percent on equity allocation. · There has been no major change with regard to bonds. Government bonds were main asset class but corporate bonds stand for 2/3 of investments · More money has been put into diversified funds · The Committee were made aware that long term risk investments generated greater returns. An example of this was equities, although it has higher volatility rates, it gave higher returns than low risk investments.
Tower Hamlets Pension Fund
· The Committee were informed that there has been 1.6% return-more than last year, surpassing the benchmark. · The fund outperformed the benchmark over the latest year for the first time in 8 years and only the second time in the last decade · The Committee were told that longer term stock selection has been unfavourable. This was due mainly to below benchmark returns in the UK equities. · Relative risk is low compared to other Funds within the local authority universe- The World Markets representative informed the Committee that over the course of five years LBTH has not performed in accordance with the benchmark
In response to Members’ questions, the following information was provided:
· Concerning long term Manager performance and low percentile, the Committee were informed by the World Market’s representative that the low percentile was due to having a UK equity Manager which was not performing well, which explained the low returns.
· Concerning investment in the Pacific region and whether it was possible to invest elsewhere, where the authority would get higher returns, the Committee were informed that it is important to have a long term strategy in place and ensure that it is at a level of risk that the authority is comfortable with as this has proven to ... view the full minutes text for item 5.2 |
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Vary Order of Business At the request of the Investment and Treasury Manager, the Chair moved and the Committee agreed that the order of business be varied to enable Managers Baillie Gifford to be interviewed. Accordingly, agenda item 5.5 was considered following item 5.2 and consideration of the agenda as published was resumed from item 5.3.
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Investment Performance Review and LGPS Updates for Quarter Ended 30 June 2014 PDF 465 KB To consider the quarterly investment update. Minutes: The Investment and Treasury Manager reported performance of each of the mandates in the fund's investment portfolio, as reported at agenda item 5.3, and highlighted in particular the outperformance of Baillie Gifford Global Equity Mandate, GMO Global Equity mandate and Legal and General Index Linked Gilts mandate.
The committee was informed that · the Fund’s overall value in the period 31st of March 2013 to 30th of June 2014 had increased by £18.8 million. Resolved
that the report to be noted
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Fund Managers Update PDF 319 KB To receive an update from Mr Haines - Investment Professional Minutes: The external Investment Consultant presented the report on the Review of Investment Manager’s Performance for Second Quarter of 2014.
The key findings presented from the report were; · That the UK equity markets were up 6.4%
· GMO- The Committee were told that GMO had outperformed in the recent quarter and had retained all underperformance back. The Committee were made aware that GMO were asked one year ago to make a contribution on the scale of underperformance and were asked to reduce to their fees, however they since returned all the performance they had previously lost. · Investec- were a bond manager dealing in absolute returns and the fund had underachieved since inception. However it was not recommended that this manager be replaced at this time as it was anticipated that performance would improve once rising interest rates returned.
Mr Haynes reported that: · two weeks previously he had met with GMO and had agreed to move from the custom benchmark that had been agreed and place GMO on the same benchmark basis as Baillie Gifford (i.e. MSCIAC world index). · 1% had been removed from the GMO portfolio and 1% from the Legal and General money portfolios which would be redeployed to cash for an interim term pending other investment opportunities. · Baillie Gifford's diversified growth fund was closed to new investors, however Tower Hamlets was an investor at the inception of the mandate and as such were able to retain access to further investment in this mandate.
Resolved
that the update to be noted
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Presentation by Fund Managers - Baillie Gifford To receive a presentation from the above Managers. Minutes: The committee welcomed Anthony Dixon and Fiona McLeod of Baillie Gifford and noted that the Fund held the following two mandates with this manager.
The Committee were informed of Baillie Gifford’s primary aims, which was to endeavour to get greater returns with low risks but to have less volatility.
Members were informed of the volatility targets which were less than 10% per annum and they were also told that the Fund was able to make broad investments as long as the management was suitable.
Baillie Gifford representatives informed the Committee of LBTH’s current approach: · After the financial crisis most assets have been better valued, this could be seen as an opportunity to have allocation of riskier assets. However assets were expensive and geopolitical risks needed be taken into consideration, for example China’s financial growth.
A Member noted that the firm incorporated environmental and ethical governance into its activities but it had not signed up to the London Association of pensions fund authorities (LAPFA) statement of investment principles approved by the LAPFA Board in December 2013 and highlighted the reputational risk that public sector bodies could incur where investment ethics were not well monitored. In response to this query, Mr Dixon advised that Baillie Gifford has a specialist corporate governance team who are able to advise on ethical matters and the firm has subscribed to the U N principles of ethical investments. He agreed that the firm's statement on ethical investment would be provided to the committee and advised also that, in relation to the Diversified Growth Fund, it was not possible to monitor all activity as closely as equity investments since very many investments made up this portfolio. Additionally investments that comprised this fund crossed a number of stocks and therefore exposure to individual investments was diluted.
The committee also requested the following information be provided to all Council Members:
Concerning the selection of appropriate investments for the Global Alpha portfolio members were informed that these were on the basis of projected investment returns. If returns were not achieved, the investments would be reviewed and where necessary terminated
RESOLVED
that the presentation be noted
Action by: Mr Dixon – Baillie Gifford
Members requested report on ethical call for future agendas |
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LGPS Governance Updates To receive an update from the Investment and Treasury Manager. Minutes: Mr John Raison Independent Investment Adviser, Pensions Fund Adviser provided an update on the LGPS framework outlining the changes and responsibilities arising from the regulations of the Public Services Pension Act 2013
In particular he highlighted:
Members noted the presentation made and requested that the CIPFA code of practice been made available/circulated to members of the committee.
Action by: B. Tobun, Investment and Treasury Manager, Resources
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Training Events To receive an update. Minutes: This item was incorporated into item 5.6. |
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2013/14 Pension Fund Annual Report PDF 137 KB To note the annual accounts Additional documents: Minutes: The chief accountant presented the draft annual report 2013-14 and requested that members note the draft presented. In particular he highlighted:
The committee requested information on the following matters:
The following requested were made:
Concerning what accessibility issues would be caused by the recent legislation that prevented member participation in local government pension schemes, the chair was informed that some research had been done into this matter and the and officers were investigating whether any alternatives were available.
Resolved
That the following be noted:
1. Pension fund annual report 2013-14 2. Pension fund statement of accounts 3. Funding strategy statement 4. Statement of investment principles 5. Governance compliance statement.
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ANY OTHER BUSINESS CONSIDERED TO BE URGENT Minutes: Nil items |