Issue - meetings
Presentation from SECTOR
Meeting: 26/03/2013 - Audit Committee (Item 4)
Presentation from SECTOR
Minutes:
Dan Wilson and Tim Hughes of Sector introduced themselves. Mr Wilson, Head of Credit and Investments, advised the Committee his role was to study markets and their activity. Mr Hughes, Client Manager, advised his role was cash management for clients and customer management, providing support as required. He advised that he worked daily with the Chief Financial Strategy Officer managing the cash requirements of the Council to ensure optimum return for minimum risk as stipulated in the Council's current investment strategy.
Mr Hughes advised that part of the reason for the observed decrease in returns over the past year was the conservative nature of the Council’s investment strategy. He noted that most of the investment was in liquid short-term investments which delivered the lowest market yield available. On this matter, the Chief Financial Strategy Officer advised that he had recently been given a mandate to broaden the scope to access better returns. Mr Hughes advised that extending the counterparty list would give access to better returns and this could be undertaken on a short-term basis.
Concerning the Council’s investment with OCBC in preference to Santander UK, Mr Hughes advised that Sector had not recommended investment in Santander UK because it does not meet the Council’s minimum credit criteria OCBC on the other hand meet the criteria. The Chief Financial Strategy Officer advised that the Council had previously invested with Santander UK; however, since the credit crisis and subsequent downgrade of a number of UK financial institutions, it has not been possible to continue investing with Santander and some other UK banks.. However it was intended that flexibility was increased during the next financial year. Additionally he noted that whilst the Council may wish to invest with a financial institution they may not necessarily require funding. , For example HSBC are not looking to accept deposits despite meeting the Council’s minimum credit criteria.
Concerning financial ratings, Mr Wilson advised that many ratings had been reduced by agencies such as Moody's and Fitch, not because the investments were less safe than they had been previously but because these organisations had changed their ratings criteria, hence there was a smaller investment pool.
Concerning Managers’ fees, the Chief Financial Strategy Officer confirmed that Sector was paid by results. Payment comprised a fixed fee plus a performance element. Members enquired whether the Chief Financial Strategy Officer could be pressured to obtain maximum investment returns and Mr Shonola advised that he was not authorised to act in this way; hence Sector was not able to apply pressure to get maximum returns.
Concerning whether the Council should consider being less risk averse and allocate a larger percentage (e.g. 10%) to larger risk investments, Mr Hughes advised that such a decision would lie with the Council but a proposal could be considered if the authority wished. On this matter, the Chief Financial Strategy Officer advised that the strategy was presently well-balanced in accordance with the agreed strategy and contained some low and medium rated risks. He ... view the full minutes text for item 4