Contact: Ian Howell, (01962) 847540; email: [email protected]

1 Summary

1.1 This report sets out for the Panel's approval suggestions for the timetable and frequency of the Panel's meetings with the recently appointed investment managers.

2 Previous arrangements for Panel meetings with the managers

2.1 Prior to changes in the investment management structure introduced on 1 January 2007, the Panel met the three multi-asset managers Aberdeen, Schroders and SGAM twice a year in May and November, and the property manager Cordea Savills annually in May. The County Treasurer also met each manager in February and August so that, overall, the managers reported on their activities and performance at face-to-face meetings at quarterly intervals, either to the Panel or the County Treasurer.

3 Proposal meetings

3.1 From 1 January 2007, the Fund's new management structure has increased the number of managers from four to ten, with one manager, Aberdeen, responsible for two portfolios, as summarised in Table 1.

3.2 To continue the previous arrangement of the Panel meeting the non-property managers twice a year would require an increase in the number of Panel meetings. However, the nature of the portfolios, ranging from the passively managed index linked bonds to the high performance equity portfolios provides an opportunity to introduce a more tailored approach to the Panel's meetings with the managers that reflects the potential risks involved. This can be done within the existing pattern of twice-yearly Panel meetings, as follows.

3.3 The Panel would meet the high performance equity managers, Aberdeen, AllianceBernstein, Newton and SGAM twice each year, in May and November. As the core UK equity portfolios managed by Aberdeen and Schroders are lower risk, it is suggested that the Panel would meet them annually in November. Aberdeen would report on their low risk UK equity portfolio alongside their high performance global equity portfolio at the November meeting.

3.4 The Panel would also meet the global bonds manager Western once a year in November. Although this is a high performance bonds mandate, Western's portfolio is relatively small at 5% of the Fund (c.£139m) and it is suggested that the Panel would not need to see Western more frequently than annually.

3.5 It is also suggested that the previous pattern of annual meetings with the property managers, CB Richard Ellis and Arlington should continue, with CB Richard Ellis reporting in May as the property performance measurement cycle is based on calendar years. Arlington will attend the Panel in November 2007 but once their portfolio of indirect property funds is fully invested, the need for annual meetings with them can be reconsidered.

3.6 No meetings are proposed between the Panel and the two managers of the passive UK index linked bonds portfolios, Legal & General and State Street as there should be no significant policy or performance issues to discuss. Both portfolios are held in pooled funds that track the relevant benchmark FT index. Performance should not vary from the index by more than +/-0.1% per annum. Explanations for such variations that do occur will be included in future reports to the Panel.

3.7 If the Panel agrees, the proposed timetable of meetings will be as summarised in Table 2, based on 2007.

3.8 For those managers that meet the Panel at annual intervals or not at all, it would be possible to invite them to attend a meeting of the Panel if major concerns arise about their performance or other issues of policy.

3.9 The County Treasurer will continue to meet all the managers in February and August each year and will report to the Panel on any matters of concern.

3.10 Bramdean, as advisers on alternative investments, report to the Panel's sub-group on alternative investments which was established in January 2007. At this stage, a formal timetable of regular meetings of the sub-group has not been established. Instead, meetings have been held with Bramdean when there are particular investments or issues to discuss. On average, it is expected that the long-term adviser on alternative investments will report at least quarterly particularly during the period in which the portfolio is being built up. Reporting arrangements will be discussed with the long-term adviser once they have been appointed at the Panel's meeting on 25 May 2007. The County Treasurer will report to the full Panel on the progress of the alternative investments portfolio at six-monthly intervals. In addition, the Panel may wish to meet the long-term adviser once a year in November for an annual report on the portfolio.

4 Conclusion

4.1 The proposed pattern of meetings balances the need for the Panel to hear regularly from the managers about their activities and performance, the potential risks involved in the different types of portfolio, and a wish to maintain the current number of Panel meetings. A safeguard is provided by the option of inviting managers to attend the Panel more frequently should their activities or performance disappoint.

4.2 The proposed pattern of meetings, if adopted, can be reviewed in a year's time.

5 Recommendation

1 That the Panel meets Aberdeen, AllianceBernstein, Newton and SGAM every six months, Schroders, Western, CB Richard Ellis and Arlington annually and Legal & General and State Street not at all.

2 That the Panel meets the adviser on alternative investments annually.

3 That the pattern of meetings be reviewed after the first year.

Section 100D - Local Government Act 1972 - background documents

The following documents discuss facts or matters on which this report, or an important part of it, is based and have been relied upon to a material extent in the preparation of this report.

NB: The list excludes:

None.

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