Agenda item

This report is a summary of all manager issues that need to be brought to the attention of the 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, which provided a summary of manager issues for the committee’s attention, as well as details of manager investment performance.
2. The committee had a number of questions relating to the proposal, detailed on page 53 of the agenda papers, to invest in the Secondary Opportunities Fund (SOF) III:

a.     The Vice-Chairman queried whether it was sensible to invest in funds that would not form part of the BCPP. The Strategic Finance Manager (Pension Fund & Treasury) responded that Government accepted that there would be a small number of assets that would not immediately go into the pool and that there was a period of over two years before the pool would come into operation.

b.     There was a request for information on the performance of SOF I and II, to which the Surrey Pension Fund Adviser responded that it was still early days to assess performance on such long term investments.

c.      The Chairman queried what Standard Life were investing the money in, to which the Surrey Pension Fund Adviser responded that it was unlikely they would provide a structured list. He stated that the advantage of secondary investments was that, due to their long-term nature, assets could be brought at a reduced price. However, the disadvantage was that you did not tend to have a say in which industries you were investing in.

d.     The Strategic Finance Manager (Pension Fund & Treasury) clarified that Surrey had invested $20 million dollars in both SOF I and II, and that such investments had generally been very profitable.

e.     The Partner from Mercer highlighted that the Surrey fund was slightly underweight in their commitment to private equity. Investing in the SOF III now would be a good way of diversifying the fund’s vintage year exposure.

f.       After discussion, Members and Officers agreed to support investment into SOF III. However, the Vice-Chairman requested that it be recorded in the minutes that he would prefer to know what other SOF opportunities were available.

g.     The Chairman requested that Officers look to further reduce the management fee.

3. There was a discussion regarding Manager meetings and the fact that, in the past, committee members had been able to attend these and found them helpful. The Strategic Finance Manager (Pension Fund & Treasury) stated that, in future, he would ensure the dates of these meetings were circulated to committee members. However, the Chairman stressed that it was important for Members to remember that these meetings are an executive tool and that Members should only attend as observers.
4. The Senior Accountant introduced the Management Investment Performance Report. The Independent Advisor highlighted the fact that overall asset value had reduced by 5%.
5. The Surrey Pension Fund Advisor provided an overview of the Fund Manager meetings, as detailed in annex 2. The Surrey Pension Fund Advisor stated that the key issue for consideration of the Pension Fund Committee was in relation to the meeting held with CBRE, and whether to increase investment in property given that the fund is already overweight in this area. After discussion, the committee agreed to amend the policy allocation to property from 6.5% to 7.5%, allowing for an investment of £30miillion from pension fund cash.
6. The Partner from Mercer stated that Western may change their portfolio to tap into high yield opportunities in America. The Surrey portfolio with Western’s Multi Asset Credit team would have advantage of this.

Actions/further information to be provided:

None.

Resolved:

1. That the report was noted.
2. That the Pension Fund Committee approve a $25m USD commitment to Standard Life Capital Partners Secondary Opportunities Fund III, subject to successful fee negotiation.
3. That the Pension Fund Committee agrees to amend the asset policy allocation to property from 6.5% to 7.5%, allowing for a cash injection of £30million.