Issue - meetings

6.1       The Committee considered a report by the Chief Finance Officer summarising the position of the Pension Fund for 2014/15.

6.2       The Committee RESOLVED to:

1)            approve the Independent Auditor’s (KPMG) Annual Governance Report on the Pension Fund Annual Report; and

2)            authorise the Chief Finance Officer to sign the formal Letter of Representation to KPMG LLP.

4a.1     This item was introduced by Ola Owolabi, Head of Accounts and Pensions (OO).

4a.2     David Zwirek (DZ) proposed that the Pension Board should examine the issue of the fees charged by Investment Managers, particularly in terms of recent increase in these costs at a period where the performance of the funds does not obviously justify high charges (e.g. when compared with investing in  a fund that tracks the market).

4a.3     Angie Embury (AE) agreed, adding that it was also important to understand the total cost of transaction charges etc. – and therefore gain a holistic understanding of the additional costs involved in employing very ‘active’ Investment Managers.

4a.4     DZ also proposed scrutinising the performance of Investment Managers, noting that the long term performance of East Sussex investments is only around the 50^th percentile when benchmarked.

4a.5     In addition, DZ proposed examining the level of Pension Fund liabilities, seeking to establish whether the current levels present an acceptable risk, and what plans are in place to address the current deficit.

4a6      Sue McHugh (SM) suggested that it might be useful to consider Investment Manager performance inclusive of fees, rather than exclusive of fees as is typically the case.

4a.7     The Chair agreed that the Board should be interested in the issues of the costs of investment activity, the performance of various fund managers, and the degree to which the scheme is funded. The Chair proposed, and members agreed, that the Board should receive reports on Investment Manager fees and performance (including benchmarking information), and on implications of the scheme funding level at the next Board meeting.

4a.8     MK told members that she was happy to report on the above issues. In terms of performance, it was important to recognise that in investment terms, high performance is strongly correlated with high risk investment strategies. It is therefore necessary to understand performance in the context of the fund’s investment strategy: high returns often reflect high risk and/or the acceptance of high volatility. MK also noted that the issue of fees had been recently explored with Investment Managers.

4a.9     SM noted that it would be useful for the Board to know how the Pension Committee proposed dealing with the issues of fees, performance and the degree to which the scheme is funded.