Agenda and minutes

There were no declarations of interest on this occasion.

RESOLVED – That the minutes of Meeting of the Pensions Panel held on 2 December 2014 be confirmed and signed by the Chairman.

The Director of Finance and Resources submitted a summary of the performance of the Pension Fund together with a portfolio of the Fund’s investments as at 31 December 2014.

The Panel were informed that Global equities were broadly positive over the fourth quarter of the year with the MSCI World and MSCI All Countries World Indices rising by +3.25% and +2.91% respectively, in local currency terms.  Oil prices fell sharply during the quarter which resulted in poor performances by the Energy and Commodity sectors. Russia was particularly badly affected by falling oil prices, with a significant depreciation in the rouble, to which the Russian government responded by raising interest rates.  In the UK, November saw the Consumer Price Index (CPI) fall to 1%, its lowest level in 12 years. GDP continued to increase, with a rise of 0.7% for Q3. Post quarter end the first estimate of Q4 growth was announced at 0.5% prompting fears the UK recovery was beginning to soften.

The Panel also noted that, at £3.56 billion, the market value of the Fund at 31 December 2014 was the highest market value of the Fund reported to date.  The Fund generated a positive return of 3.4% over the quarter, slightly behind the benchmark return of 3.5%. Over the year to date, the Fund had returned 7.7%, which was above the return assumptions made by the Actuary in their 2013 valuation, and continued to be in line with the longer term Fund returns of 7.7% per annum.

RESOLVED – That the Pension Fund performance and portfolio of investments for the quarter ended 31 December 2014 be noted.

Report of the Director of Finance and Resources

The Director of Finance and Resources informed the Panel that it was a regulatory requirement for the Fund to have an Annual Investment Strategy (AIS) for the day to day management of the cash it held. The Pension Fund currently had a small strategic asset allocation to cash of 1%, recognising that cash balances were needed for the day to day management of the Fund.

In response to a question from Ms. McKiernan, the Director explained that the main objectives for the AIS were to -

a)    provide security of capital (i.e. ensure the return of the money and interest);

b)    provide liquidity (i.e. pay the bills as they fell due and ensure funds were available for reinvestment when needed); and

c)    earn interest (i.e. obtain a reasonable return within the constraints outlined at a) and b) above).

The Panel noted that the main circumstances where a revised strategy would be prepared include a change in:

·         the Fund’s strategic asset allocation;

·         the economic environment;

·         the financial risk environment; and

·         the regulatory environment.

The Panel also noted that whilst they would be responsible for approving any revised strategy, it may be necessary for action to be taken quickly. It was proposed, therefore, that the responsibility for assessing the circumstances above should rest with the Director of Finance and Resources.

Mr Marshall referred to the very low interest rate environment which threatened the ongoing continuity of Money Market Funds (MMF) as each MMF charged a fee and this could mean that interest earned became negative after the fee had been deducted.  He enquired as to whether this point had been reached in the Staffordshire Pension Fund.  In response, the Director of Finance indicated that, after fee deductions, MMFs were currently paying in the region of 35 - 45 basis points.  If the problem of negative interest arose then it would be a matter of moving funds to an alternative class of investment.

The Panel noted that the MMF’s proposed for use by the Pension Fund would be ‘AAA’ rated, the highest possible credit rating and they would have the following attributes:

·         Diversified – MMF’s are diversified across many different investments, far more than the Pension Fund could hope to achieve on its own account.

·         Same day liquidity – this means that funds can be accessed on a daily basis.

·         Ring-fenced assets – the investments are owned by the investors and not the fund management company.

·         Custodian – the investments are also managed by an independent custodian, who operates at arms-length from the fund management company.

The Panel were also informed that the new banker for the Pension Fund, Lloyds Bank, had been transitioned in successfully and was now fully operational. 

RESOLVED – (a) That the proposed Annual Investment Strategy (AIS) for the Staffordshire Pension Fund, for the investment of internally managed Pension Fund cash, be approved.

(b) That the Director of Finance and Resources be authorised to take any necessary urgent action to amend the Annual Investment Strategy as a  ...  view the full minutes text for item 38.

16 March 2015 (Special Meeting)

9 June 2015

21 July 2015

8 September 2015

1 December 2015

1 March 2016

All meetings are scheduled to start at 9.30am at County Buildings, Stafford

16 March 2015 (Special Meeting)

9 June 2015

21 July 2015 (Managers’ Day)

8 September 2015

1 December 2015

1 March 2016

All meetings are scheduled to start at 9.30am at County Buildings, Stafford.

RESOLVED - That the public be excluded from the meeting for the following items of business which involve the likely disclosure of exempt information as defined in the paragraph of Part One of Schedule 12A of the Local Government Act 1972 (as amended) indicated below.

The Panel then proceeded to consider reports on the following issues:

Report of the Director of Finance and Resources

Report and Presentation by Hymans Robertson

Report of the Director of Finance and Resources

(Report of Record Currency Management for the month ended 31 January 2015 enclosed for information)

(Report of Portfolio Evaluation for the quarter ended 31 December 2014 enclosed for information)

Training and Presentation by Hymans Robertson

To receive a presentation from Russell Investments on the performance of the Fund’s Emerging Market Equity portfolio.

(Report of Russell Investments for the quarter ended 31 December 2014 enclosed for information)