Agenda and minutes

To note the attendance at this meeting of any duly appointed Reserve Members.

Reserve Members may attend meetings:-

(i)                 to take the place of an ordinary Member for whom they are a reserve;

(ii)               where the ordinary Member will be absent for the whole of the meeting; and

(iii)             the meeting notes at the start of the meeting at the item ‘Reserves’ that the Reserve Member is or will be attending as a reserve;

(iv)              if a Reserve Member whose intention to attend has been noted arrives after the commencement of the meeting, then that Reserve Member can only act as a Member from the start of the next item of business on the agenda after his/her arrival.

RESOLVED:  To note that there were no Reserve Members in attendance at this meeting.

To receive declarations of personal or prejudicial interests, arising from business to be transacted at this meeting, from:

(a)               all Members of the Committee, Sub Committee, Panel or Forum;

(b)               all other Members present in any part of the room or chamber.

RESOLVED:  To note that the following interests were declared:

Agenda Item 11 – INFORMATION REPORT – Update Report and Action Points from Previous Meetings

Howard Bluston declared a personal interest in that he attended meetings as a representative of the North London branch of the National Association of Pension Funds with the firm included in the tender process to appoint an Advisor to the Panel.  He remained in the room whilst the matter was considered and voted upon.

Agenda Item 12 – INFORMATION REPORT – Report on BlackRock by Hymans Robertson

Agenda Item 13 – Presentation by Blackrock

Howard Bluston declared a personal interest in that he had met with BlackRock on a number of occasions as the representative for Harrow on the Edward Harvist Trust Charity.  He would remain in the room whilst the matter was considered and voted upon.

That the minutes of the meeting held on 24 November 2010 be taken as read and signed as a correct record.

RESOLVED:  That the minutes of the meeting held on 24 November 2010, be taken as read and signed as a correct record.

To receive questions (if any) from local residents/organisations under the provisions of Committee Procedure Rule 17 (Part 4B of the Constitution).

RESOLVED:  To note that no public questions were put, or petitions or deputations received at this meeting.

Report of the Corporate Director Finance

The Panel received a report of the Corporate Director of Finance and the Adviser to the Panel, Hymans Robertson that outlined the options available to the Panel in updating the investment strategy of the pension fund to better reflect the current actuarial valuation results.

The Advisor to the Panel and an officer reported that:

·                     the typical cycle for reviewing an investment strategy was every 3 years.  The Panel had previously agreed to revisit the strategy at a training event that took place in September 2010.  Officers had noted that the Panel sought guidance on maximising the return on investments;

·                     modelling of the investment strategy took place in 2008 alongside the actuarial valuation.  The range of options currently available to the Panel was limited by the wish to maintain a stable level of contributions and the level of assets within the pension fund.  It was considered that the current strategy adopted by the Panel had a better balance of expected outcomes than two of the four alternative strategies;

·                     pensioncashflows will rise over time and the Panel were invited to consider how the strategy would work in the long term.  There was limited scope to reduce the allocation of growth assets and deliver the same return on investments.  The median projected funding level for the current strategy after 21 years was in excess of 100%, although the range of outcomes was wide.  Reducing the equity allocation for a higher bond allocation reduced both the median funding level and downside risk;

·                     introducing an absolute return allocation into the fund had the capability of improving both expected return and reducing the impact of adverse outcomes.  The success of such a portfolio is more reliant on manager skill;

·                     a portfolio that delivered better than expected outcomes, such as a diversified absolute return portfolio, was recommended for consideration by the Panel.

In response, the Panel noted that including absolute returns in the fund could add value and would potentially improve performance of the fund.  

RESOLVED:  That:

(1)               the report be noted;

(2)               the Panel would receive a presentation by absolute fund managers at a future Panel meeting;

(3)               an investment strategy would be discussed and implemented following the appointment of an Adviser to the Panel.

(4)               additional information on cashflows would be provided at future discussions.

Report of the Corporate Director Finance

The Corporate Director of Finance presented a report that set out the value of the pension fund as at 30 November 2010.  The officer reported that actuarial assumptions and contribution stabilisation mechanisms would be revisited once the outcome of the Hutton enquiry on public sector pensions was published.

The projected funding level as at March 2010 had fallen compared to 2007 by around 8%.  However, the Actuary was content for contributions to the pension fund to continue to increase at a rate of 0.25% each year.

The overall value of the pension fund at the end of November 2010 was £439 million and increased by £30 million at the end of December 2010 to £469 million.

RESOLVED:  That the report be noted.

To resolve that the press and public be excluded from the meeting for the following items of business, on the grounds that they involve the likely disclosure of confidential information in breach of an obligation of confidence, or of exempt information as defined in Part I of Schedule 12A to the Local Government Act 1972:

RESOLVED:  That the press and public be excluded from the meeting for the following items as they contained information under Part I of Schedule 12A to the Local Government Act 1972, paragraph 3, as they related to the financial or business affairs of any particular person or the authority holding that information:

Report of the Corporate Director Finance

An update on the actions taken since the last Panel meeting on 24 November 2010 was received.  The Panel noted that:

·                     Harrow Council had participated in a joint tender exercise with the London Borough of Corydon to review the appointment of an Actuary and Adviser to the Panel;

·                     Croydon had indicated their preferred candidates.  However, Harrow may not be contractually bound to make the same appointments.  Officers at Harrow Council would prepare a paper following a meeting with the preferred candidates and invite them to attend the Panel meeting on 7 March 2011;

·                     Members of the Panel were invited to attend an information gathering meeting with the preferred investment advisor on 7 February.

RESOLVED:  That the update be noted.

Report of the Corporate Director Finance

The Panel considered a report by Hymans Robertson on the BlackRock bond portfolio where Members noted the report prepared by Hymans Robertson before receiving the presentation from BlackRock.

RESOLVED:  That the report be noted.

Presentation by Blackrock (8.30 pm)

The Panel received a presentation by BlackRock which addressed the existing portfolio and opportunities to restructure the bond mandate to provide additional return opportunities.

The Panel noted that:

·                     BlackRock had anticipated that the return on corporate bonds would be better than Government bonds as there was greater scope for investment that would add value to the existing asset allocation;

·                     it was anticipated that there would be minimal movement in interest rates in 2011 and inflation would increase in the future;

·                     to deliver higher returns within the portfolio, the level of risk and reward in the portfolio would need to be reviewed.  Alternative methods of investment, such as, derivative instruments or other investment options with a wider remit could potentially add value to the fund and maximise performance of the fund.

RESOLVED:  That the presentation be noted.

As this was the last Panel meeting before the Corporate Director of Finance began her new post in Central Government, the Panel thanked her for all the support and guidance during her appointment.