Agenda item

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.

Declarations of interest:

None.

Key points raised during the discussion:

1.    The Strategic Finance Manager – Pensions & Treasury introduced the report.  He informed the Board that a final report on the transfer of funds from Mirabaud to Majedie Asset Management would be provided at the next meeting.

2.    The Strategic Finance Manager – Pensions & Treasury explained the reasons for the sale of Capital Dynamic’s US Solar Fund to Terra Forma Power Inc.  He would circulate an annualised return and IRR (Action Review ref: A1/15).

3.    Members expressed difficulties with regard to the proposed meeting on 15 May 2015 and requested that this be changed (Action Review ref: A2/15).

4.    The Board discussed the increased premium quoted by Legal & General to take out an ill health insurance policy.  The Board supported the recommendation to delay the purchase of ill health insurance and suggested that the issue be looked at again in a year.  The Strategic Finance Manager – Pensions & Treasury agreed to include information on ill health insurance in an upcoming communication to employers (Action Review ref: A3/15).

5.    The Board considered the drivers for working towards a liability driven investment (LDI) strategy.  In particular the Board addressed funding levels and the real yield trigger.  It was generally accepted that a real yield trigger should not be adopted in isolation from the funding level.  It was agreed to come back to this later in the meeting.

6.    The Strategic Finance Manager – Pensions & Treasury introduced the audit findings for Pension Fund Investment and the Management Action Plan.  He highlighted the high priority recommendation on quarterly reconciliations and explained that, while reconciliations had taken place immediately, at the time of the audit there had been a slight delay in updating the council’s SAP system.  It would be a priority to update SAP in future.

7.    The Surrey Pension Fund Advisor responded to the audit recommendation that independent advisers comply with FCA guidance, in particular the RDR rules.  He suggested that there was some confusion as he provided strategic investment advice and so did not need to be FCA registered. The Chairman informed the Board that she had discussed this point with the Chief Internal Auditor and did not believe that the recommendation would be pursued.

8.    The Board considered investment in the Marathon Emerging Market Fund.  The Strategic Finance Manager – Pensions & Treasury and the fund’s advisers supported this as a way for Marathon to provide exposure to emerging markets without having to deal with the bureaucracy imposed by particular countries.  It was agreed to defer this decision and for the Strategic Finance Manager – Pensions & Treasury to provide more detail (Action Review ref: A4/15).

9.    The Strategic Finance Manager – Pensions & Treasury tabled the Pension Fund Board’s Assessment Results (attached as Annex 2).  He highlighted areas where the Board had excelled and topics on which training could be provided.  The Chairman informed the Board that some of the questions had been badly worded and that feedback had resulted in the test being reviewed.  She suggested that she hold one to ones with Board members to discuss the results (Action Review ref: A5/15).

10.  The Minutes of the Fund Manager meetings were tabled and introduced by the Surrey Pension Fund Adviser, (attached as Annex 3 to the Minutes).  A number of questions were asked and answered by officers and advisers.  It was agreed to diversify part of the CBRE portfolio by setting a target of 25% in its Global Alpha Fund within the CBRE benchmark.

11.  The Strategic Finance Manager – Pensions & Treasury introduced the Financial and Performance Report.

12.  The Board considered the Asset Allocation and in particular the allocation to property.  The Surrey Pension Fund Adviser suggested increasing the target allocation to property to 7%.

13.  The Senior Accountant explained the differences between the tables on pages 41 and 42 of the report.

14.  The Chairman informed the Board that she and the Strategic Finance Manager – Pensions & Treasury had met with Newton’s CEO and was reassured that they now have an improved strategy.  They felt it prudent to continue with Newton as a global equities manager but to review the fee structures with all fund managers.  She also suggested that it was timely to do a deep dive review of the Pension Fund, including the performance and cost of investment advisers, actuarial costs and the costs of other overheads.  It was agreed that two Members should work with officers on this review and bring back a report in September (Action Review ref: A6/15).

Actions/Further information to be provided:

      i.        The Strategic Finance Manager – Pensions & Treasury to circulate an annualised return and IRR for Capital Dynamic’s US Solar Fund.

     ii.        Officers to reschedule the meeting on 15 May 2015.

    iii.        The Strategic Finance Manager – Pensions & Treasury to include information on ill health insurance in an upcoming communication to employers.

   iv.        The Strategic Finance Manager – Pensions & Treasury to provide further detail on the potential investment in the Marathon Emerging Market Fund.

    v.        The Chairman to hold one to ones with Board members to discuss the assessment results.

   vi.        Two Members to work with officers on a deep dive review of the Pension Fund, including the performance and cost of investment advisers, actuarial costs and the costs of other overheads and to bring a report back to the Board in September.

Resolved:

1.    That the report was noted.

2.    That the purchase of ill health insurance from Legal & General be DELAYED until the full implications of the revised price and new scheme rules have been fully evaluated.

3.    That part of the CBRE portfolio be diversified by setting a target of 25% to be invested in CBRE’s Global Alpha Fund, with the other 75% remaining in UK property and the CBRE benchmark to reflect this allocation.

Next steps:

None.

The meeting was adjourned at 11.10am for a short break and reconvened at 11.30am.