Agenda and minutes

Apologies for absence were received from Councillor Beacham.

There were no items of urgent business.

No declarations of interest were received.

That the Minutes of the meeting held on 21 November 2005 be confirmed and signed as an accurate record.

Referring to the minutes of this body, the Chair requested that officers update the panel about the implementation of decisions made and matters raised, during this period.

To consider receiving deputations and/or petitions in accordance with Standing Order No. 35

No deputations or petitions were received.

A presentation to Members by our custodian, Northern Trust

Ray Bloom and Ronda Skeels from Northern Trust made a presentation to the Pensions Panel, outlining the organisation’s role as the Haringey LGPS’ custodian and Performance Manager.

Mr. Bloom and Ms. Skeels stated the role of the custodian was to make sure that the transactions of Haringey LGPS were settled quickly and with minimal financial impact. They did not have control over the decision as to what shares were bought or sold. That was a matter for the fund managers.

Mr. Jones, the Advisor to Trustees, informed members that the status of custodian was one that had become more common since the Maxwell Report, as that recommended the separation of the functions of asset management from those of safekeeping those assets.

Mr. Bloom and Ms. Skeels informed the Panel that the custody fees charged by Northern Trust would be reviewed in March 2006.

Northern Trust had been the commission recapture agent for the LGPS since November. Mr Jones requested that they send him a copy of the method used in their commission recapture system.

The Chair stated that so far he was happy with the performance of Northern Trust. He enquired from them as to whether they had faced any challenging tasks as the custodian and wanted to know the quality of the monitoring systems they had in place.

Mr. Bloom informed the Panel that one of the challenges for a custodian was to make sure that information relating to transactions was provided in a timely, accurate and automated fashion.  He explained that the monitoring system the firm used was one that they had developed in house and was based on double-entry principles. The Chair also enquired whether they could arrange training for the panel members in better scrutinising the performance of the Fund Managers.

In reply, Mr. Bloom and Ms. Skeels informed the Panel that their company has organised training schemes for some clients. These training schemes would boost knowledge and awareness among trustees as to the operation of pensions systems.

RESOLVED:

That the presentation and report by Northern Trust be noted.

Each will give a 2 minute introduction and a 10 minute presentation, followed by 8 minutes of questions from Trustees and 5 minutes of questions from the Advisor and any other questions.

1. 7:25pm Fidelity
2. 7:50pm Capital
3. 8:15pm Bernstein
4. 8:40pm Wellington

Each Fund Manager gave a presentation of approximately 10 minutes followed by questions from Members and the Advisor.

i.                    Fidelity

ii.                  Capital

iii.                Bernstein

iv.                 Wellington

i. Fidelity

Peter Yarrow from Fidelity addressed the Panel.

Fund performance was 0.55% above benchmark and 0.18% above target in the quarter to September 2005. Annualised performance since inception was 0.26% above benchmark and 1.14% below target.

Mr. Yarrow said the fund was overweight in Japanese equities and underweight in bonds. This was a strategy the Fund was following as it was felt that Japanese equities had a large potential for growth.

The Chair asked the opinion of Mr. Yarrow about where the predominant weight of the Fund’s investment should be. Mr. Yarrow said that, as the LGPS’ liabilities were in pounds sterling, UK equities should be the largest component of the investment portfolio.

The Panel asked Mr. Yarrow how Fidelity was working to promote corporate social responsibility with the funds it was managing on behalf of the Haringey LGPS. Mr. Yarrow informed the Panel that Fidelity was exercising proxy votes and was using them to vote against remuneration packages for directors if they were not matched by performance. However, Mr. Yarrow said that they would not refuse to buy shares in a firm on purely ethical grounds.

ii. Capital

Anthony Burgess from Capital addressed trustees.

Fund performance was 1.00% below benchmark and 1.37% below target in the quarter to September 2005. Annualised performance since inception was 0.70% below benchmark and 2.20% below target.

Mr. Burgess stated that underperformance in the quarter was mainly due to UK equities. The Fund was underweight in oil stocks, but oil firms did particularly well in that quarter. The best performing component of the portfolio was Japanese equities.

Mr. Jones, the Advisor to Trustees, mentioned the departure of an analyst in the insurance sector. He asked if any further changes in their team were anticipated. Mr. Burgess replied to say there would be some changes in the media division.

The information provided by Capital to the Panel stated that the cost of turnover was 26 basis points (0.26%). Mr. Jones asked if this would be disaggregated into execution and research costs. Mr. Burgess stated this was not currently possible but, following pilot work in the US, it would be rolled out in the UK in future.

Mr. Burgess informed the Panel that he was optimistic that the firms the fund had invested in would show high rates of return in the medium-term despite their underperformance in the 3^rd quarter of 2005.

iii. Bernstein

A presentation was made by Patrick Rudden on behalf of Bernstein.

Fund performance was 0.03% above benchmark and 0.47% below target in the quarter to September 2005. Annualised performance since inception was 0.28% above benchmark and 1.72% below target.

Mr. Rudden explained that part of the reason for the rate of return being lower than target in this quarter was because the valuations of UK firms had converged. There was less difference between  ...  view the full minutes text for item 7.

The Director of Finance, Mr. Travers, presented his report on Fund Performance and Administration to the Panel.

The combined Haringey Fund has increased in absolute terms since inception by

18.72 % in annualised terms. Fund performance was 0.21% below benchmark and 0.62% below target in the quarter to September 2005. Annualised performance since inception was 0.48% below benchmark and 2.13% below target.

Mr. Travers said that Part 1 of the review of strategy had been undertaken at the November meeting of the Panel when the report of Hymans Robertson was presented to it. Parts 2 and 3 would look further at strategy and at what the Panel wanted from its fund managers and would take place at future meetings. He mentioned the scheduled meeting on 2^nd February would be examining issues falling under Part 2.

Mr. Travers assured members that the spend to date was within budget. He commended the approach Hymans Robertson had suggested for trustee training. He mentioned that, after May, he would talk to individual Panel members of the new Pensions Panel about training issues.

The Panel was informed by the Director of Finance that he was awaiting guidance from CIPFA on governance matters. When received, these matters would be referred to members for their attention at the March 2006 meeting. The Chair asked the Director of Finance to circulate the guidance, whenever received, to Panel members with a request to give their suggestions, if any, to him in time before the meeting.

Mr. Travers stated there was uncertainty regarding the 85 year rule. However, it appeared likely that it would cease from 31 October 2006. 

Currently, the earliest age at which an employee can retire is 50. Mr. Travers informed members that it was due to rise to 55 by 2010. Mr. Travers also mentioned to members that there would be rule changes that would allow employees to take a larger lump-sum on retirement.

In reply to the Chair’s concern expressed at past meetings about extra government grant money towards assisting the Haringey LGPS, Mr. Travers informed the Panel that no new government money had been made available by Whitehall to assist local authority pension funds.

A Business Plan will be prepared for the Pensions Fund for 2006/07 as requested by the Chair.

The Chair mentioned that ING have not yet furnished a FRAG-21 certificate. The deadline for this was March 2006. The Chair requested that officers ensure that this date is met.

The Chair concurred with the Director of Finance’s statements on trustee training. The Chair mentioned that he would like training providers to include National Association of Pension Funds (NAPF) and Northern Trust, but personally he did not like to avail himself of any training from the Fund managers, for the interest of better monitoring their performance.

The Panel asked the Director of Finance to ensure that we receive written replies from each Fund Manager regarding our letter on unbundling of commissions and copy these to the Chair.

The Chair mentioned that up  ...  view the full minutes text for item 8.

There were no new items of urgent business admitted by the Committee