Agenda item

For Members to review and approve the approach being taken to the revision of the Investment Strategy Statement.

The report was introduced by the Head of Pensions and Treasury who explained there were no changes being proposed but that the Investment Strategy Statement was being put forward for consultation and review. Changes agreed by the Committee would be incorporated into the statement which would be brought back to the Committee for formal adoption prior to the end of the financial year. It was emphasised that officers were initially seeking board guidance from the Committee on what changes were required.

In response to Member questions it was established that the fund contained three broad categories of asset classes:

·        Equities: the engine of wealth production in the fund, growing faster than liabilities;

·        Fixed interest: for example corporate bonds and government debt which tended to match the growth of liabilities; and

·        Alternates: which tended to over perform and used up large amounts of risk.

Additionally, the fund also held cash which was generated by the collection of contributions and was paid out in liabilities (the levels of these two factors were closely matched).

Councillor Hall and Lisa Taylor, the Director of Finance, Investment and Risk, joined the meeting at 10:26am.

It was established that the fund does not hold gold or other precious metals. The Head of Pensions and Treasury explained that as with other commodity trading, this was quite a risky approach with the skills sets involved for management expensive to acquire. The Mercer representative concurred, emphasising that better return rates were available from other asset classes.

In response to a Member question about holding private debt, the Mercer representative stressed that each asset class was in competition for the capital held in the fund and as such had to prove itself. Therefore, it was important to question if it was the right approach to help the fund meet its objectives. The Head of Pensions and Treasury concurred, noting that the more risky the private debt the better the return. Private debt could encompassed everything from Treasury Bonds and Gilts, regarded as being as safe as cash, through a whole spectrum of debt from AA (blue chip debt) to high yield debt. It was noted that if this was added to the types of assets held, more resource would be required to manage and provide due diligence.

Members asked about reporting on the investments in Pimco. Officers explained that this was down to timing and that a report would be forthcoming.

A Member questioned the potential for growth through investments in emerging markets and the limitations imposed as a result of pooling through the CIV. The Vice-Chair, Councillor Hall, the Cabinet Member for Finance and Resources, highlighted that the CIV was being very responsive; it was listening to local authorities and developing appropriate products.

Members asked questions about the performance of individual asset classes, how this was measured and benchmarked.

RESOLVED: the Committee AGREED the recommendation in the report for drafting a revised Investment Strategy Statement and delegated to the Director of Finance, Investment and Risk and section 151 officer, in consultation with the Chair of the Committee, the final approval of the Investment Strategy Statement.