Issue - meetings

This report summarises the stages of the investment strategy review, provides an update on the implementation and sets out a draft revised Statement of Investment Principles for approval.

The report provided a summary of the decisions taken in the investment strategy review (this was requested by committee members at the previous meeting) and further included an update on the implementation process. The committee were also asked to consider and approve a revised statement of investment principles attached at appendix 2.

Following questions from members the following information was provided:

• The difference between active and passive fund management was that passive fund managers would hold investments in an index. They could not select investments that perform better than average but the pension fund can expect to get same proportion index rate of return in investments as indicated by the index e.g. FTSE All Share. Therefore there was a degree of certainty around returns to the pension fund. Alternatively an Active Fund Manager will select investments that they believe will perform better than the whole market. It was learnt by the previous pensions committee that due to the time needed to make and implement these types of investment decisions in a local authority, Active fund managers were unlikely to be able to achieve performance on an ongoing basis. This had assisted the decision in changing from active to passive fund management also the  ongoing cost  of Passive fund managers was lower  than  Active fund managers.

• There was a small amount of risk associated with investments in overseas assets from movements in exchange rates, however the larger source of risk was the selection of equities over bonds. However it was prudent to hold onto outside UK companies as the returns were dependent on sterling which was still a strong currency.

• The cash flow position in the pension fund had changed over the year from surplus to breakeven point and the pensions working group would be considering this position and its impact on the pension fund strategy going forward.

RESOLVED

1. That the draft revised Statement of Investment Principles set out in Appendix 2 be approved.

2. That the second  stage  of the investment strategy review considering non equity and bond asset classes be commenced with detailed work being carried out by the working group  before recommendations are presented to the Corporate Committee.