Presentation by Gerald Almeroth, Chief Financial Officer.
Minutes:
Gerald Almeroth, Chief Financial Officer, presented the Pension Fund Accounts for the year ending 31 March 2009 and the interim Fund valuation at 31 March 2009.
Mr Almeroth informed attendees that the value of the Fund had significantly decreased to £488 million and funds managed by Fund Managers had decreased by 21.6% in the last year. The Committee noted that Bernstein had ceased to be a Fund Manager in June 2009 due to low performance and had been replaced by L&G on a temporary passive basis.
Mr Almeroth assured the Committee that it was not unusual for pension funds to decrease in the current economic climate and emphasised the need to view investments over the long term.
A large proportion of the Fund’s investments were in the UK and some overseas, however, the Council was not taking undue risks by investing in volatile countries. An interim evaluation showed the funding level to be reduced to 53% in March 2009 but had risen to 58% by May 2009.
The Council would consider the need for any changes in the employer contribution rate after the next 3-year actuarial evaluation in March 2010.
The Chair invited questions from members of the Pension Fund.
In response to a question from an attendee Mr Almeroth explained that whilst the Council had cash deposits in Icelandic Banks (90% of which was expected to be returned) none of this money was part of the Pensions Fund.
In response to a question as to why there had been £32 million of cash investments, Mr Almeroth explained that investing the cash into banks with a 2% interest rate was a temporary measure prior to investment. While stock markets had been falling, this was not an issue for the fund.
An attendee asked what say Pension Fund Members had about the potential rise of employee contributions. Mr Almeroth stated that employee contributions were set in legislation and applied to everyone, therefore members were not able to influence the decision.
In response to a question about the Fund Manager who recently ceased to work for the Pension Fund, Mr Almeroth explained that the contract did not entitle the Fund Manager to any compensation. The Pension Fund operated on a one-week notice period for Fund Managers.
Mr Almeroth was asked what the Investment Strategy Review involved. Mr Almeroth explained that the Council reviewed the Investment Strategy every three years in order to be clear about the risks and to discuss the global situation and the balance between shares, bonds and property, the number of fund managers required and to see if the Strategy should be changed to improve the chances of a better return. The next review and actuarial valuation would take place in 2010.
In response to a question from Councillor Thompson, Mr Almeroth explained that the Pensions Committee had signed-up to the UN Principals of Responsible Investment and Fund Managers were encouraged to use the policy when reviewing investments. Environmental impact on investments was also monitored and often meant a better share value.
In response to a question from Councillor Mallett, Mr Almeroth explained that the difference between the Bernstein and L&G Fund Managers was that Bernstein was part of active management funds (that actively tried to beat the market) whereas a Passive Manager, such as L&G, moved shares around to mirror the market for short periods of time. Officers would look to move back to employing active Fund Managers next year.