Report on the Fund Valuation at 31 March 2007
Presentation by Gerald Almeroth, Chief Financial Officer.
Minutes:
The Chief Financial Officer, Gerald Almeroth, gave a presentation on the fund valuation at 31 March 2007, when the most recent full actuarial valuation had been carried out. Since the previous full actuarial valuation of the fund in 2004, the level of funding had increased from 69% to 77.7%, although this was still below the 88% level of funding in 2001. The increase between 2004 and 2007 was the result of an improvement in investment earnings and value, as well as a planned increase in employer’s contributions. An interim valuation carried out in June 2008, however, indicated that the level of funding had fallen to 66% since 2007, largely as a result of the recent volatility in the financial markets.
As it was necessary to take a long term view of the fund, it was not proposed to review contribution rates at this time, although the position of the fund would be monitored closely.
The Chair invited questions from members of the Pension Fund.
Mr Almeroth was asked whether it was proposed to invest in China, as this was a potential growth market. Mr Almeroth responded that the global investment strategy had been reviewed, and that 6% was currently invested in countries other than the UK, Europe and the United States. It was important to balance the potential level of returns against the level of risk in any investment, and the trustees would continue to monitor emerging markets and consider increasing investment in certain areas as markets matured.
Mr Almeroth was asked how the current sub-prime mortgage situation in the USA was likely to affect the investment portfolio managed by ING and the Council’s property portfolio. Mr Almeroth responded that there had been little immediate effect on property in the last quarter of 2007/08, and that there had been a much more immediate effect on equities and shares. Funds would only be requested by ING when they saw an opportunity for investment, and the impact at present was that there were few opportunities for investment available. The Chair confirmed that, in the current financial climate, the trustees had advised officers to exercise caution in any property investment.
The Chair added that in addition to the triennial valuation there had been interim yearly valuations in order to ensure the prudent management of the fund.