Agenda and minutes
PDF 262 KBVenue: Committee Room C, County Hall, Kingston upon Thames, Surrey KT1 2DN. View directions
Contact: Angela Guest email: angela.guest@surreycc.gov.uk
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APOLOGIES FOR ABSENCE AND SUBSTITUTIONS
Minutes: An apology was received from Mr John Beckett. |
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MINUTES OF THE PREVIOUS MEETING - 2 JUNE 2017
To agree the minutes as a true record of the meeting. Minutes: The Minutes were approved as an accurate record of the previous meeting. |
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DECLARATIONS OF INTEREST
All Members present are required to declare, at this point in the meeting or as soon as possible thereafter (i) Any disclosable pecuniary interests and / or (ii) Other interests arising under the Code of Conduct in respect of any item(s) of business being considered at this meeting NOTES: · Members are reminded that they must not participate in any item where they have a disclosable pecuniary interest · As well as an interest of the Member, this includes any interest, of which the Member is aware, that relates to the Member’s spouse or civil partner (or any person with whom the Member is living as a spouse or civil partner) · Members with a significant personal interest may participate in the discussion and vote on that matter unless that interest could be reasonably regarded as prejudicial. 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 (11/09/2017). 2. The deadline for public questions is seven days before the meeting (08/09/2017). 3. The deadline for petitions was 14 days before the meeting, and no petitions have been received.
Minutes: There was one question from Mr Stephen McDonald:
‘Has there been any change since the June Pension Fund Committee in 1) the level of investments in fossil fuels and 2) the value of investments in BP and Shell?’
The tabled response is attached as annex 1. |
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An action tracker is attached, detailing actions from previous meetings. The Board is asked to review progress on the item listed. Additional documents: Minutes: Declarations of interest: None.
Witnesses: Phil Triggs, Strategic Finance Manager (Pension Fund and Treasury)
Key points raised during the discussion: 1. That tracker item P1/17 could be deleted as there was a presentation on the agenda. However, following that presentation it was agreed that a further presentation was required so this item remains on the tracker. 2. Tracker item P2/17 – The Committee received a verbal update on share voting and examples of the tangible results of such voting. Other examples were given where the vote may not have been enough in itself but was of significant size to change behaviours such as that of Sports Direct. In response to a query regarding pooling it was confirmed that a service provider (yet to be appointed) would represent the BCPP and member funds would relinquish responsibility to the pool to vote. Details of this and general voting policy approval would come to a future committee for decision. 3. Tracker item P3/17 – The Committee was informed that the actuary interviews were delayed until February 2018 (Barry Mckay, Actuary, was asked to leave the room whilst the Committee discussed this tracker item.)
Actions/ further information to be provided: None.
Resolved: To delete tracker item P2/17 from the action tracker. |
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Cyber Security
Further to discussions at the February meeting regarding the Pension Fund Risk Register (Minute 14/17) the Committee will receive a presentation from Richard Smith of Northern Trust. Minutes: Declarations of interest: None.
Witnesses: Richard Smith, Northern Trust Darren Seary, Northern Trust Sheila Little, Strategic Director Finance
Key points raised during the discussion: 1. The Committee was given a presentation which described different cyber security risks, with an emphasis on ransomware, and the ways in which this was being dealt with at Northern Trust. 2. The Committee discussed how they wanted assurances from the Council’s perspective on security resilience in-house and requested a further presentation to a future meeting on the Council implementation of Cyber security in general and of the Pension Fund systems (including related 3rd party systems). (Tracker P1/17) 3. The Strategic Director of Finance explained that one of her roles was as Risk Champion for the Council and explained how a recent meeting had included a presentation on security and that the Committee should be assured that the council had security resilience high on its agenda.
Actions/ further information to be provided: To invite the IMT manager to a future committee to give a presentation on the Council implementation of Cyber security in general and of the Pension Fund systems (including related 3rd party systems).
Resolved: 1. To thank Richard Smith and Darren Seary for their informative presentation.
2. That a presentation from the council’s perspective on cyber security be requested for a future meeting.
Reason for decision: In order that the Committee can assure themselves that standards in security are being met. |
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Mercer Investment Strategy Review
Surrey Pension Fund Committee members will be presented with an investment strategy review paper, drafted by the Fund’s investment consultant, Mercer, outlining future possible investment changes, following the Fund’s triennial actuarial valuation.
Additional documents: Minutes: Declarations of interest: None.
Witnesses: Phil Triggs, Strategic Finance Manager (Pension Fund and Treasury) Steve Turner, Mercer Barry Mckay, Sheila Little, Strategic Director of Finance Anthony Fletcher, Advisor
Key points raised during the discussion: 1. Steve Turner took the Committee through a detailed discussion on each aspect of the strategy review report and responded to Member questions as they arose. 2. There was a detailed discussion about whether the Committee would want to decrease the exposure of equities as a result of the current near 100% funded status of the pension fund. The actuary’s current approach to the long-term stabilisation of employer contributions was also discussed. 3. The Committee also discussed passive managers and indexing. The Strategic Finance Manager and Steve Turner explained about Research Affiliate Financial Index (RAFI) as an alternative index, but its exposure to value stocks and high carbon approach were regarded as drawbacks. One Member requested that Legal and General be requested to provide some Member presentations on this. 4. Should the Committee consider a larger allocation to illiquid assets, given the Fund’s position as a very long term investor? 5. There were six questions posed for the Committee on page 57 of the agenda papers to which they responded: · the Committee would consider a larger allocation to illiquid assets, given the Fund’s position as a long term investor. · the Committee were comfortable maintaining the same allocation to equities as the funding position continues to improve, subject to any change reference funding the illiquid assets. · the Committee would consider triggers for future de-risking when the funding position had been defined. · the Committee would consider what alternative ways to reduce risk (e.g. equity protection strategies). · What options for further ESG integration do the Committee feel are worth further investigation? It was explained that this linked in with what the Pension Board were doing. The Committee were also informed that a joint letter from this Committee and the Pension Board was to be sent to BCP setting out the stance on ESG. · It was agreed that a “one size fits all” investment strategy was not appropriate for all fund employers and that this would need to be pursued with further reports in partnership with the actuary.
Actions/ further information to be provided: None.
Resolved: 1. That, following consideration of the Mercer investment review report, further work be implemented on the options below:- · allocation to long-term illiquid asset classes, · downside protection with regard to equity risk, and · alternative indexation reference passive investing.
2. The Investment Strategy Statement as shown in Annex 3 to the submitted report was approved.
Reason for decision: The Pension Fund Committee must approve and review all working documents produced for the Pension Fund.
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National Pooling: Update
For the Committee to be updated reference Border to Coast national pooling. Minutes: Declarations of interest: None.
Witnesses: Phil Triggs, Strategic Finance Manager (Pension Fund and Treasury)
Key points raised during the discussion: The Strategic Finance Manager introduced the report and explained that the Border to Coast ambition was to establish a fully regulated asset management company that was ready to accept the transition of assets, as required by government. The working timeline was for completion by 30 June 2018. It was recognised that this was an ambitious deadline but there had been no indication that this deadline would not be met.
Actions/ further information to be provided: None.
Resolved: 1. That the report be noted.
2. To approve the delegation of authority to the Director of Finance, in consultation with the Chairman of the Pension Fund Committee, to undertake the opting up to elective professional status process for the Border to Coast Pensions Partnership national pool when it has been established.
3. To approve the delegation of authority to the Director of Finance, in consultation with the Chairman of the Pension Fund Committee, to approve the appropriate provision using Surrey Pension Fund monies of 1/12th of the regulatory capital requirement set by the Financial Conduct Authority for Boarder to Coast Pensions Partnership Limited.
Reason for decision: The Pension Fund Committee must be kept appraised of the progress made the Officer Operations Group, Joint Committee and Shareholder Board in the drive to create a full functioning pool by the target deadline of June 2018.
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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 Surrey Pension Fund Committee, as well as manager investment performance. Additional documents: Minutes: Declarations of interest: None.
Witnesses: Phil Triggs, Strategic Finance Manager (Pension Fund and Treasury) Anthony Fletcher, Advisor, Allenbridge
Key points raised during the discussion: 1. The Committee was informed of the discussions had at meetings with four of the fund managers, Ruffer, UBS, Newton and Franklin Templeton. Newton had introduced a head to their investment team and would be watched to see how this pans out. 2. A new investment opportunity had arisen with Pantheon Infrastructure Fund and the Committee discussed how much they should invest and whether they should increase the figure suggested in the recommendation of the report. The Committee was advised that some funds do over allocate as it may be years before Pantheon would fully draw down funds and that due to equalisation some money may go back to the funds. The Committee agreed to increase the recommended figure to USD60m. 3. Resolution 3 was not made until the end of the meeting when information in response to a Member query on whether the £205m in private equity was all drawn down. The response given to this query at the end of the agenda was that the private equity figure given in the report included Darwin Properties allocations and was not strictly private equity. In the strict sense the report should read £145m in private equity. This would be rectified in future reports. 4. An error was pointed out on page 89 of the report in that the meeting dates should read 2018 and not 2017.
Actions/ further information to be provided: That future reports be amended to give the correct private equity figures.
Resolved:
Reason for decision: In order to achieve best possible performance alongside optimal risk.
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Administration Update and Issues
In line with best practice, Surrey Pension Fund Committee members will be supplied with Pension Fund key performance indicators (KPIs) on a quarterly basis, covering investment and administration practices. This paper also includes an update on administration issues. Additional documents: Minutes: Declarations of interest: None.
Witnesses: Neil Mason, Senior Advisor Jason Bailey, Pensions Lead Manager
Key points raised during the discussion: 1. Items 10, 11 and 12 on the agenda were taken together and the Senior Advisor explained all of the annexes to the reports. 2. In response to a Member query regarding where backlog issues get reported the Senior Advisor explained that these were included in the new KPIs, amongst a number of changes made to make reporting more open and clearer.
Actions/ further information to be provided: None.
Resolved:
1. That the reports on Key Performance Indicators for the quarter to 30 June 2017 be noted.
2. That the Performance Report to replace the existing KPIs was approved.
3. The monitoring report of the Local Pension Board in respect of the Pensions Administration Audit 2016/17 was noted.
Reason for decision: In order to achieve best possible performance alongside optimal risk. |
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Administration Strategy
In line with best practice, Surrey Pension Fund Committee members will be presented with a draft Pension Fund Administration strategy, outlining best practice with regard to its strategic approach to fund administration.
Additional documents: Minutes: Declarations of interest: None.
Witnesses: Neil Mason,
Key points raised during the discussion: Items 10, 11 and 12 on the agenda were taken together.
Actions/ further information to be provided: None.
Resolved: That the draft Administration Strategy, shown in Annex 1 to the submitted report, be approved for the commencement of a consultation period with scheme employers and other interested parties, with a target full approval to follow in the Pension Fund Committee meeting of 10 November 2017.
Reason for decision: The Pension Fund Committee must approve and review all working documents produced for the Pension Fund.
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Service Level Agreement/Service Specification
In line with best practice, Surrey Pension Fund Committee members will be presented with a draft service level agreement which sets out the desired relationship with regard to the service and desired standards that the Surrey Pension Fund receives from its in-house pension fund administration team.
Additional documents: Minutes: Declarations of interest: None.
Witnesses: Neil Mason
Key points raised during the discussion: The Committee was informed that a new service specification was required to reflect the changes in administration functions and responsibilities and will replace the existing Service Level Agreement between the Pension Fund and the pension administration team.
Actions/ further information to be provided: None.
Resolved: That the draft Service Specification shown in Annex 1 to the submitted report was approved.
Reason for decision: The Pension Fund Committee must approve and review all working documents produced for the Pension Fund.
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Pension Fund Accounts 2016/17
This report presents the audited financial statements of the Pension Fund for the year ended 31 March 2017, with respect of the County Council’s obligations as the administering authority under the Local Government Pension Scheme (LGPS) Regulations.
Additional documents: Minutes: Declarations of interest: None.
Witnesses: Phil Triggs, Strategic Finance Manager (Pension Fund and Treasury)
Key points raised during the discussion: 1. The Committee was informed that the Surrey Pension Fund Statement of Accounts was presented to the Audit and Governance Committee at its meeting on 27 July 2017. 2. Praise was given to Investment Accountant, Jennifer Sambell, who had taken on the role of getting the accounts, financial statements and reports completed, following the departure of Alex Moylan. She had achieved an excellent job.
Actions/ further information to be provided: None.
Resolved: 1. That the financial statements set out in Annex 1to the submitted report be approved.
2. That the content of the External Audit Findings for Surrey Pension Fund Report as set out in Annex 2 to the submitted report be noted.
3. That the Letter of Representation as set out in Annex 3 to the submitted report be noted.
Reason for decision: The Pension Fund Committee must approve all financial statements produced for the Pension Fund.
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Pension Fund and Administration Risk Registers
The Pension Fund Committee to assess the revised Risk Register in Annex 1, making any suggestions for amendment/additions as necessary. Additional documents: Minutes: Declarations of interest: None.
Witnesses: Phil Triggs, Strategic Finance Manager (Pension Fund and Treasury) Neil Mason
Key points raised during the discussion: The Committee was informed that the pension administration risk register was formed on the back of a recommendation from Audit to separate out the specific administration risks.
Actions/ further information to be provided: None.
Resolved: That the Pension Fund and Pensions Administration risk registers be noted.
Reason for decision: A solid framework of risk management is required in order to manage the considerable risk environment surrounding the governance and investment of the pension fund.
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This report provides a summary of the Fund’s share voting process. Additional documents: Minutes: Declarations of interest: None.
Witnesses: None.
Key points raised during the discussion: As there had been a good discussion on this issue under item 5 on the agenda the report was noted without further discussion.
Actions/ further information to be provided: None.
Resolved: 1. That the report be noted.
2. That the latest versions of the Responsible Investment and Stewardship Policy and Voting Template be approved.
Reason for decision: The Pension Fund Committee must be aware of the voting actions pertaining to the segregated portfolios of shares held within the pension fund.
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An updated forward plan is attached for information. Minutes: Some Members commented on the length of meetings to which the Chairman responded that he was looking at reducing future agendas. The forward plan was noted. |
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DATE OF NEXT MEETING
The next meeting of Surrey Pension Fund Committee will be on 10 November 2017. Minutes: The date of the meeting was noted. |