Agenda and minutes
PDF 68 KBVenue: Committee Room C, County Hall, Kingston upon Thames, Surrey KT1 2DN. View directions
Contact: Cheryl Hardman
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APOLOGIES FOR ABSENCE AND SUBSTITUTIONS
Minutes: Apologies were received from Philip Walker. |
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MINUTES OF THE PREVIOUS MEETING: 31 May 2013
To agree the minutes as a true record of the meeting. Minutes: The minutes were agreed as an accurate record of the meeting. |
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DECLARATIONS OF INTEREST
To receive any declarations of disclosable pecuniary interests from Members in respect of any item to be considered at the meeting.
Notes: · In line with the Relevant Authorities (Disclosable Pecuniary Interests) Regulations 2012, declarations may relate to the interest of the member, or the member’s spouse or civil partner, or a person with whom the member is living as husband or wife, or a person with whom the member is living as if they were civil partners and the member is aware they have the interest. · Members need only disclose interests not currently listed on the Register of Disclosable Pecuniary Interests. · Members must notify the Monitoring Officer of any interests disclosed at the meeting so they may be added to the Register. · Members are reminded that they must not participate in any item where they have a disclosable pecuniary interest.
Minutes: There were none. |
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QUESTIONS AND PETITIONS
To receive any questions or petitions.
Notes: 1. The deadline for Member’s questions is 12.00pm four working days before the meeting (16 September 2013). 2. The deadline for public questions is seven days before the meeting (13 September 2013). 3. The deadline for petitions was 14 days before the meeting, and no petitions have been received.
Minutes: There were none. |
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AFFIRMATION OF DISCUSSIONS HELD AT THE INFORMAL BOARD MEETING OF 31 MAY 2013
A summary of notes of the Board’s informal London meeting of 31 May 2013 is included for discussion and approval.
Additional documents: Minutes: Declarations of Interest: None.
Key Points Raised During the Discussion: 1. The Chairman introduced the report.
Actions/Further Information to be Provided: None.
RESOLVED: i. To APPROVE the notes of the Board’s informal London meeting of 31 May 2013. ii. To AGREE to amend CBRE’s benchmark outperformance requirement to +0.5% per annum (gross of fees) over rolling three-year periods with the injection of a further £25m; iii. To AGREE that a breach in the control range on the asset allocation categories as shown in the newly approved Statement of Investment Principles (SIP) would not stipulate that steps be taken immediately to restore parity, but that this breach would necessitate discussion amongst the Chairmen and officers and, where appropriate, the Pension Fund Board; iv. To AGREE that the Fund should continue to ensure a diverse portfolio of assets to mitigate risk and volatility of returns; v. To AGREE to balance the portfolio by removing £25m from LGIM’s passive mandate and transferring to Baillie Gifford Diversified Growth Fund; and vi. To REVISIT discussions concerning the transfer of £50m from LGIM’s passive mandate and transferring to the Standard Life GARS Fund, subject to the outcome of discussions with Standard Life at Item 13 on the agenda.
Next Steps: None. |
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MANAGER ISSUES AND INVESTMENT PERFORMANCE
This report is a summary of all manager issues that need to be brought to the attention of the Pension Fund Board, as well as manager investment performance.
Additional documents: Minutes: Declarations of Interest: None.
Key Points Raised During the Discussion: 1. The Strategic Manager, Pension Fund and Treasury introduced the report, explaining to Members an issue with a recent Board decision to subscribe to the BlackRock DivPep V Fund. While the Board had previously agreed to invest USD 20m, BlackRock’s understanding was that the Board was going to invest £20m. The structured fee level was higher for investing with USD 20m, so officers held back from confirming subscribing to this fund. Following a discussion, the Board agreed not to go ahead with the BlackRock DivPep V Fund investment. 2. The Pensions Manager explained the auto enrolment statistics. Members queried the effect on cash flow but the Pensions Manager stated that this wouldn’t be known until mid-November. The Chief Finance Officer informed the Board that the People, Performance and Development Committee had built £1m into the Medium Term Financial Plan based on an opt-out rate of 10%. This would need to be reviewed as opt-out had been higher than 10%. 3. At the previous Surrey Pension Fund Board meeting, it had been agreed that a stock lending programme with Northern Trust should commence. The legal agreement was being scrutinised by Mercer. The Mercer representative highlighted a clause regarding indemnification which was very advantageous to Northern Trust. Negotiations are ongoing and the outcome will be reported to the next Board meeting. 4. There was a debate regarding the Standard Life Capital Secondary Opportunities Fund. The Surrey Pension Fund Adviser stated that the concept of focusing on secondary opportunities was good. The Mercer stated that it would be useful to have an indication from Standard Life regarding the level of discounts that it thought was available in the market. However, he was comfortable with Standard Life as a private equity manager and was supportive of the proposal to invest. The Board was informed that Standard Life had presented to a number of local authority pension funds on this opportunity but it was not known whether any had bought in. There was some concern that the total exposure to Standard Life would be high if this investment was made. The Strategic Manager, Pension Fund and Treasury informed the Board that the Secondary Opportunities were specifically for private equity products while GARS was concerned with the Diversified Growth fund, a separate entity. The Chairman questioned whether the Board would be taking a credit risk by investing in the Fund. The Mercer representative explained that there would be some credit risk as the opportunities are generally off-shore and so do not have as much protection. The Chief Finance Officer pointed out that the Pension Fund was underweight on the private equity asset class. It was agreed to defer a decision on this investment until after meeting with Standard Life at Item 13. 5. There was a discussion with regard to a proposed investment in the Capital Dynamics Global Clean Energy and Infrastructure Fund. The Board expressed concern that the fee was a little high as some ... view the full minutes text for item 25/13 |
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PENSION FUND RISK REGISTER
Surrey County Council, as administering authority for the Surrey Pension Fund, is responsible for the delivery of benefit promises made to members of the Surrey Pension Fund. It achieves this by setting objectives and goals with varying timeframes. Risks lie in failing to meet the intended goals.
Risks that are established as an issue must be identified and evaluated via a risk register. The risks must be prioritised with existing controls or new controls implemented to mitigate the risks. This should be recorded in a risk register, which needs regular monitoring.
Additional documents: Minutes: Declarations of Interest: None.
Key Points Raised During the Discussion: 1. The Strategic Manager, Pension Fund and Treasury introduced the report, clarifying that there had been no changes to the Risk Register since the previous meeting. 2. There was a discussion about including the residual risk following mitigating actions. Officers agreed to do this for future reports.
Actions/Further Information to be Provided: Officers to evaluate the residual risk following mitigating actions and include this as a column within the Risk Register.
RESOLVED: To NOTE the Risk Register.
Next Steps: None.
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KEY PERFORMANCE INDICATORS
In line with best practice, Pension Fund Board members will be supplied with Pension Fund key performance indicators (KPIs) on a quarterly basis, covering investment and administration practices.
Additional documents: Minutes: Declarations of Interest: None.
Key Points Raised During the Discussion: 1. The Strategic Manager, Pension Fund and Treasury introduced the report. He pointed out that, with regard to the data quality indicator, the interim feedback from the actuarial evaluation suggested that the data provided by the pensions team had been of a very high quality. The team was talking to the actuary about what method can be used to evaluate data quality. This information will be used to inform a method for measuring performance on data quality within the Pension Fund. The Pensions Manager suggested that this will probably be an annual measurement. 2. The Strategic Manager, Pension Fund and Treasury informed the Board that a mechanism would be devised to allow the customer service indicators to be measured. The Chairman suggested that officers speak to the team who undertakes the employee survey. The Pensions Manager pointed out that the member satisfaction survey results may be influenced by attitudes towards different employers within the Fund. This would need to be addressed in the development and evaluation of a survey.
Actions/Further Information to be Provided: None.
RESOLVED: To APPROVE the KPI statement format.
Next Steps: None.
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REVISED STATEMENT OF INVESTMENT PRINCIPLES
With the slight changes to the private equity portfolio and the property manager benchmark outperformance requirement, it is now necessary to approve a revised Statement of Investment Principles (SIP).
Additional documents: Minutes: Declarations of Interest: None.
Key Points Raised During the Discussion: 1. The Strategic Manager, Pension Fund and Treasury introduced the report, outlining changes from the previous Statement of Investment Principles. 2. There was a query over why the Borough/District representatives, the external employer representative and the Fund Member representative were listed as Co-opted Members. It was explained that the Board is a County Council committee to which non-Councillors can be co-opted. There was a query about the composition of Local Committees which the Regulatory Committee Manager agreed to respond to.
Actions/Further Information to be Provided: Regulatory Committee Manager to respond to a Member regarding the composition of Local Committees.
RESOLVED: i. To APPROVE the revised Statement of Investment Principles; ii. To AGREE that a breach in the asset allocation control range of greater than +/- 3.0% will not require steps to be taken immediately to restore parity, but require that the breach will necessitate discussion amongst the Chairman and officers and, where appropriate, the Pension Fund Board.
Next Steps: None.
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LGPS: CALL FOR EVIDENCE ON THE FUTURE STRUCTURE OF THE LOCAL GOVERNMENT PENSION SCHEME
The Department for Communities and Local Government has issued a call for evidence on the future structure of the Local Government Pension Scheme. This paper sets out a summary of the various issues that need to be considered.
Additional documents: Minutes: Declarations of Interest: None.
Key Points Raised During the Discussion: 1. The Strategic Manager, Pension Fund and Treasury introduced the report. 2. The Chairman informed the Board that the Government had established a LGPS Advisory Board on which she sat. The Government believes that if Pension Funds are pooled it will reduce the cost of administering them. However, current data does not suggest that there is any correlation between the size of the Pension Fund, associated investment management fees and investment performance. The Mercer representative confirmed that many consultees were saying the same thing. 3. The Chairman suggested that the Government was taking a London-centric view of Pension Funds. In London there are many very small Funds which are not comparable with a Fund such as the Surrey Pension Fund. 4. Members suggested that forcing Pension Funds into a few super-Funds would be a mistake. The only positive would be a possible saving on fees but the data has already shown this to be unlikely. 5. Members also argued that pooling Pension Funds would be unfair on taxpayers in different areas as some Funds have not been managed as effectively as others. This would lead to some areas seeing taxes rise to support Funds which have not been effectively managed. The Surrey Pension Fund Adviser informed the Board that when mergers were first discussed it did mean that assets and liabilities would be merged. It now only refers to assets but the Board needs to be clear on this in its response. 6. The Chairman informed the Board of a requirement under the Pensions Act to establish a Pension Fund Scrutiny Board to oversee the operation and decision making of the Pension Fund Board. This would require the establishment of a further Board which would be difficult to find members for.
Actions/Further Information to be Provided: None.
RESOLVED: To DELEGATE the drafting of a formal response to the LGPS Call for Evidence on the Future Structure of the Local Government Pension Scheme to the Chief Finance Officer, in consultation with the Chairman of the Surrey Pension Fund Board, taking into account the views and observations of the Board.
Next Steps: A further report to the Surrey Pension Fund Board following proposals due to be published before the end of 2013.
The Surrey Pension Fund Board adjourned its meeting at 11.30am for a short break and reconvened at 11.35am. Item 11 was deferred to follow Item 14. |
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LIABILITY MANAGEMENT, INFRASTRUCTURE DEBT
To receive a presentation on Liability Management and Infrastructure Debt. Minutes: Declarations of Interest: None.
Also in attendance: Toby Buscombe, Principal, Mercer Marc Devereux, Principal, Mercer
Key Points Raised During the Discussion: 1. The Mercer representatives provided a presentation on liability risk management and infrastructure (slides attached as Annex 1). 2. It was suggested that Risk Ref. 2 within the Risk Register – bond yields fall leading to an increase in value of liabilities – was a crucial risk to watch and that mitigating actions should be developed further based on the information provided during Mercer’s presentation. 3. There was general support for the concept of dynamically de-risking by setting trigger levels but not at this time. 4. The Chairman suggested that the Board needed a more detailed discussion on equity derivatives in the future. 5. The Board considered the investment in Funds managing infrastructure debt. It was informed that while the management of infrastructure debt was a relatively recent phenomenon with only a limited number of fund managers focusing on this area, each of those managers had very specific strategies. Due diligence would need to be exercised and risk controls developed if investing in these Funds. The Chairman pointed out that the credit analysis was key. The Mercer representatives added the need to ensure that the portfolio was well-diversified and that the Manager has the ability and track record to enforce when required.
Actions/Further Information to be Provided: To schedule a discussion on equity derivatives.
RESOLVED: To NOTE the presentation on Liability Risk Management and Infrastructure Debt.
Next Steps: None.
The Surrey Pension Fund Board adjourned its meeting at 12.55pm for lunch and reconvened at 1.27pm.
John Orrick and Sheila Little sent apologies for absence from the afternoon session.
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PRESENTATION: STANDARD LIFE
To receive a presentation from Standard Life. Additional documents: Minutes: Declarations of Interest: None.
Also in attendance: Dale MacLennan, Investment Director, Standard Life Neil Richardson, Investment Director, Standard Life
Key Points Raised During the Discussion: 1. The Standard Life representatives gave a presentation. They assured the Board that the departure of Euan Munro as the Director of Multi-Asset Investing and Fixed Income at Standard Life had not been a surprise and that the team was capable of continuing without him. The name and brand was still attracting the best people to work within the team. The Board was informed that Euan Munro had in recent years taken on board other responsibilities and had not been as involved as he had been when the team was first put together. The Standard Life representatives agreed that Guy Stern’s style was different from Euan Munro’s but that he had been working on the product since 2008 and knew and understood its strengths. He was also keen to be as inclusive as possible. In response to concerns raised that Euan Munro may wish to take people with him to his new company, the Standard Life representatives considered that this was unlikely, although could not be ruled out. It was also pointed out that morale was high in the team and there was no feeling that anyone wished to leave. Members suggested that if the Board was investing in a Fund because of one person, that strategy should be reviewed. It was clarified that investment in Standard Life had not been on the basis of Euan Munro being in the lead post. It was recognised that Standard Life had a well-resourced team, with significant experience. In response to a query about Guy Stern’s new responsibilities, it was clarified that he had not taken on all of Euan Munro’s previous responsibilities and so would still be involved in the day to day running of the team.
RESOLVED: That under Section 100(A) of the Local Government Act 1972, the public be excluded from the meeting for the rest of Item 13 and for Item 14 on the grounds that they involve the likely disclosure of exempt information under paragraph 3 of Part 1 of Schedule 12A of the Act.
THE REST OF ITEM 13 AND ITEM 14 WAS CONSIDERED IN PRIVATE BY THE SELECT COMMITTEE. HOWEVER, THE INFORMATION SET OUT BELOW IS NOT CONFIDENTIAL.
2. Following further discussion based on a confidential presentation (slides attached as Annex 2), the Standard Life representatives left the meeting.
Tony Elias left the meeting.
3. The Board discussed the various investment opportunities with Standard Life. The Strategic Manager, Pension Fund & Treasury tabled a paper which outlined the Pension Fund’s exposure to Standard Life (attached as Annex 3).
Actions/Further Information to be Provided: None.
RESOLVED: To AGREE that the Surrey Pension Fund make a USD 20m commitment to the Standard Life Secondary Opportunities Fund.
Next Steps: None.
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PRESENTATION: CBRE
To receive a presentation from CBRE. Minutes: Declarations of Interest: None.
Also in attendance: Alex Bignell, Head of UK, CBRE DJ Dhananjai, Director, CBRE Max Johnson, Director, CBRE
Key Points Raised During the Discussion: 1. The CBRE representatives gave a confidential presentation (slides attached as Annex 4).
Actions/Further Information to be Provided: None.
RESOLVED: To NOTE the CBRE presentation.
Next Steps: None.
RESOLVED: i. To go back into public session (Part One); ii. That the items considered under Part Two of the agenda should remain confidential and not be made available to the press and public.
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SURREY PENSION FUND ACCOUNTS 2012/13
This report presents the audited financial statements of the Pension Fund for the year ended 31 March 2013, in respect of the County Council’s obligations as the administering authority under the Local Government Pension Scheme (LGPS) Regulations.
The external auditor (Grant Thornton) has issued an unqualified opinion on the accounts and this is outlined in the Audit Findings for Surrey Pension Fund Report.
Additional documents: Minutes: Declarations of Interest: None.
Key Points Raised During the Discussion: 1. The Strategic Manager, Pension Fund and Treasury introduced the report. He explained that Jon Evans had been responsible for preparing the Financial Statements and had since departed his role. The recently appointed Senior Accountant, Alex Moylan, had taken responsibility for steering the Accounts through the external audit process. The External Auditors had made no recommendations, with only some minor adjustments made following discussions. 2. The Strategic Manager, Pension Fund and Treasury showed the Board a mock up of the cover of the Pension Fund’s Annual Report.
Actions/Further Information to be Provided: None.
RESOLVED: i. To NOTE and APPROVE the financial statements; ii. To NOTE the content of the Audit Findings for Surrey Pension Fund Report; iii. To commend Jon Evans and Alex Moylan for their excellent work in the production and audit of the accounts; and iv. To NOTE the Letter of Representation.
Next Steps: None.
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PRESENTATION: MANIFEST
To receive a presentation from Manifest. Minutes: This item was WITHDRAWN. |
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THE STEWARDSHIP CODE
The report sets out the case for adopting The Stewardship Code as a step towards achieving effective corporate governance and acting as a responsible investor with regards to the companies that it owns.
Additional documents: Minutes: Declarations of Interest: None.
Key Points Raised During the Discussion: 1. The Strategic Manager, Pension Fund and Treasury introduced the report and informed the Board that, since its last meeting, an external governance adviser had been appointed.
Actions/Further Information to be Provided: None.
RESOLVED: To ADOPT The Stewardship Code and APPROVE the Fund’s commitment to the Code.
Next Steps: Compliance with the Code is kept under regular review and progress reported to the Board where appropriate.
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DATE OF NEXT MEETING
The next meeting of the Surrey Pension Fund Board will be on 15 November 2013. Minutes: The date of the next meeting was noted. |