Issue - meetings

This report is a summary of all manager issues that need to be brought to the attention of the Surrey Pension Fund Committee, as well as manager investment performance.

Declarations of interest:

None

Key points raised during the discussion:

1.    The Strategic Finance Manager (Pension Fund & Treasury) introduced the report, tabling the notes from the external fund manager meetings on 9 November 2015 (attached as Annex 2 to the minutes).

2.    The Senior Advisor (Pension Fund) gave a verbal summary of the meeting of the Local Pension Board on 12 October 2015. 

3.    In response to a question about whether there is a limit to the amount of stock lending that is allowed, the Strategic Finance Manager (Pension Fund & Treasury) confirmed that there was a limit.

4.    A member of the committee enquired whether the second paragraph on Internally Managed Cash (p19) would be accurate in the long term.  The Strategic Finance Manager (Pension Fund & Treasury) confirmed that the Fund would be cash positive for the next few years as it generates more cash than it pays out in benefits. 

5.    The Surrey Pension Fund Advisor suggested that the real yield trigger be treated as commercially sensitive in future.  It was agreed that officers would consider how to take this forward (Action Review A16/15). 

6.    The committee discussed the impact of the second Markets in Financial Instruments Directive which will reclassify all local authorities as retail clients.  The Chairman confirmed that the Shadow Advisor Board was against this reclassification.  Members felt it important to convey to the Financial Conduct Authority the huge administrative burden and additional cost for financial services firms and local authority pension funds.  The Chairman agreed that the cost should be addressed but did not feel that too much time should be spent calculating that cost at the present time. 

7.    Members queried why KPMG had been appointed to look at the separation of the Pension Fund from the Host Authority.  The Surrey Pension Fund Advisor explained that KPMG had been getting involved in governance related activity.  The Director of Finance also highlighted KPMG’s experience in auditing. 

8.    The Strategic Finance Manager (Pension Fund & Treasury) gave an update on national asset pooling and Surrey’s activities.  He confirmed that positive progress had been made with Cumbria and East Riding.  Talks were ongoing with six other local authorities and talks with three others were in the pipeline.  While the Funds were geographically distant to Surrey, they have good governance records and good relationships could be developed.  A full paper and draft proposal would be brought to the committee in February 2016.  Members agreed that regular private updates would be welcomed (Action Review A17/15).  The Chairman asked the committee for its opinions on taking on a small poorly governed Fund to help it improve and pointed out that this would not have a huge impact on overall returns.  This was generally approved of and it was felt that more than one small Fund could be supported in this way.  There was concern that pooling could lead to big philosophical shifts for some Funds as different Funds take different investment approaches eg some manage investments predominantly inhouse while  ...  view the full minutes text for item 71

The Board continued with consideration of the cash position. 

Key points raised during the discussion:

1.    The Chairman highlighted that Tim Evans, who had sent apologies for the meeting, had previously urged any surplus cash to be invested to help balance our asset allocation benchmarks.

2.    The Board went through the options available for investment of cash.

Actions/Further information to be provided:

None.

Resolved:

That £30m cash be invested in GARS/GFS according to the Fund’s mandate ie in the ratio of 70:30 GARS and GFS respectively.

Next steps:

None.