Agenda item

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

4b.2     The Chair noted that, in order to fully comprehend the information in this report, Board members needed to understand how the fund benchmark is calculated. MK agreed, noting that fund performance (and hence the benchmark figures) has to be viewed relative to the fund investment strategy, since the strategy will determine the level of returns that Investment managers seek. The Fund has had a strategy of diversification and pursuing less volatile returns overall by hedging against equities – it is crucial to judge performance in the context of the objectives of the investment strategy. Additionally, there has been a recent disinvestment in equities in favour of gilts. The intention here has been to reduce risk levels by increasing holdings of low risk investments. This is fully in line with our strategy, and was recommended by Hymans as a way to ‘lock-in’ recent gains. However, this will inevitably have resulted in a lower return on investment, which needs to be understood as a positive rather than a negative, even though it may appear on face-value to indicate under-performance.

4b.3     SM commented that it would be useful for a report on Investment Manager fees and performance to include information on how performance targets are set. SM noted that she was uncomfortable about setting performance targets that are gross of fees, as this appears to offer a poor incentive.

4b.4     MK told members that the Board could talk to the fund’s independent advisors about these issues, although this would entail an additional expense. The Board has no set budget to pay for this type of training, but sensible costs would be met. The Chair noted that, given the costs involved, it was important that the Board was clear on how it wanted to use the fund’s independent advisors before meeting with them.

4b.5     In response to a query from BR, MK explained that the Hyman’s report in the Board papers was the same report that would go to 27 July Pension Committee. These reports will unavoidably focus on the previous quarter’s activities; a more up to date report would be too expensive to produce.

4b.6     There was discussion about the performance of Lazard’s, with MK telling members that there has been a performance issue here for several years.

4b.7     Members discussed their training needs. It was noted that it was unlikely that there could be shared training with the Pension Committee. Cllr Kevin Allen (KA) noted that, as a recent appointee he had not yet received any training, although he was eager to undertake some.

4b.8     The Chair noted his preference for short sharp training sessions rather than lengthy and expensive training.

4b.9     AE made the point that she was unhappy that Pension Committee members could make substantive decisions about the pension fund without necessarily having had the level of training in pension issues required of Unison representatives on the Pension Board. MK noted that the recent Government regulations on training had focused on the Pension Board rather than on Pension Committees as it was a new body. However, as with any other local authority body, it was incumbent on the county council to ensure that all elected member decisions are appropriately informed.