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:
Phil Triggs, Strategic Manager Pensions and Treasury
John Harrison, Independent Advisor
Barry McKay, Hymans Robertson
Key points raised during the discussion:
Notes from meetings with Fund Managers and officers were briefly discussed.
1. The meeting went into closed session at 11.40am to discuss exempt information from a meeting had with officers and Franklin Templeton. The meeting reopened to the public at 11.53am.
2. The Committee discussed the investment opportunity in Darwin Leisure Development Fund. It was noted that Darwin Leisure Property Fund had done very well with Surrey Pension Fund’s investment of £20m in 2013 which had increased in value by 36.8% to £27.3m.
3. The Strategic Manager Pensions and Treasury explained that Darwin Leisure Property Fund had reached its optimum size hence the opening of the new project Darwin Leisure Development Fund. The new project would focus on parks with potential for redevelopment and sites which had planning permission that had not yet been implemented. The new fund, unlike Darwin Leisure Property Fund, would also utilise gearing at a level of around 20% to help finance acquisitions and redevelopment.
4. The Darwin Leisure Development Fund would require a lock in of 10 years and fees would be 75 basis points reducing to 50 basis points after one year. Mercer confirmed that Darwin had a B+ rating and that the fees were acceptable. The Committee noted that Surrey’s investment in the Property Fund could not be transferred to the Development Fund due to the lock in period.
5. The Darwin Leisure Development Fund would require a lock in of 10 years. The Committee noted that Surrey’s investment in the Property Fund could not be transferred to the Development Fund due to the lock in period.
6. Members raised several issues of regarding the Development Fund that required further response:
· Redistribution of profits from the closed Property Fund investment
· What contingencies were in place between Darwin failing and an individual leisure park failing
· The Committee would need to consider further the 10 year lock in period
· How quickly was Darwin expecting to raise the whole £300m
· Reassurance was requested on the sustainability of the holiday park and that the market was not saturated.
Border to Coast:
7. The Strategic Manager Pensions and Treasury introduced the update on this particular item in the report and explained the various stages. Stage 3 was split into two phases. The first phase included finalisation of a detailed project plan, approval of the next stage budget (£300k per Partner Fund), set up of shell company, and drafting, evaluation and award of tenders for all required advisory services between now and January 2017. If the timeline was adhered to it was hoped to have a report for approval at full Council in March 2017.
8. The Chairman explained that the S151 officer had some concerns about finance and legal officers having enough information to propose an agreement to Council. The S151 officer would be seeking further legal advice on the legislation details.
9. Members sought clarity on the proposed spending limits on consultants. The Strategic Manager Pensions and Treasury explained that consultants were only used when the particular expertise was not available within the 12 participating councils.
10. In response to a Member query about where borough and district councils fitted in the Strategic Manager Pensions and Treasury reported that there were over 200 employers of the Surrey Fund with Surrey County Council as the administering authority and the AGM was being held on the 18 November where the pooling proposal would be explained to employers.
11. Barry McKay tabled and presented a detailed overview of the 2016 valuation initial results. The deficit had reduced by £300m over the last three years and funding level was 82.6%.
12. In response to a Member query on how the change to CPI had impacted on the results it was reported that the results would have still been good. It was generally felt that the move to CPI was a good move.
13. One Member complained about having the paper tabled as most of the information could have been provided along with the agenda.
1. To DEFER the decision to approve a £20m commitment to the Darwin Leisure Development Fund pending further discussion.
2. The outlined Border to Coast project implementation methodology; proposed resourcing, and member oversight through the creation of three implementation sub groups, and the next stage budgetary commitment of £300k to enable the project to progress was approved.
Reason for decision:
In order to achieve best possible performance alongside optimal risk.