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

1 Introduction

1.1 This report summarises a number of personnel and other changes at the Fund's investment managers.

1 Recommendation

That the report be noted.

2 Newton

2.1 The fund manager for the Hampshire global equity portfolio since Newton's appointment in January 2007 has been Paul Butler, accompanied by the client liaison director John Burke.

2.2 Newton's global mandate business has developed significantly over recent years. They have aimed to maintain a consistent investment philosophy since their inception but have frequently adapted their team structure to changing circumstances. Newton believe that this has enabled them to focus on delivering performance to clients as their needs evolve. Recent discussions about the further evolution of the business have involved Paul Butler as a member of the four-person Global Equity Model Group but after a period of sick leave, he has now left Newton. He has been replaced as the fund manager for the Hampshire portfolio and as a member of Newton's Global Equity Model Group by Jon Bell who will be attending this Panel meeting with John Burke.

2.3 Jon Bell joined Newton in 1995 after graduating from Cambridge University and has been part of the 12 person global funds team, chairing the Global Multi-Asset Model Group.

2.4 Newton's Chief Investment Officer Jeff Munroe has emphasised to the County Treasurer that Newton's investment process is team based and not dependent on one individual. Although Newton have been remarkably successful for the Hampshire portfolio during 2007, they do not believe that success to be attributable solely to Paul Butler's input.

3 Aberdeen

3.1 Aberdeen have announced that their Head of Pan-European Equities, Chou Chong, has decided to re-locate back to Singapore to work once again with Aberdeen's Asia Pacific team. He has been replaced as Head of Pan-European Equities by James Laing who is a senior investment manager with the Pan-European team having joined Aberdeen in 2000.

3.2 Chou Chong has not been directly involved in the investment of Hampshire's UK equities or global equities portfolios. Aberdeen adopt a team approach to investment process and his replacement by James Laing is not expected by Aberdeen to affect the Hampshire funds.

3.3 The Panel's key contacts at Aberdeen will continue to be Anne Richards, the Chief Investment Officer, and Patrick Walker on client liaison. Anne Richards is, however, unable to attend this Panel meeting and Patrick Walker will accompanied by Andrew McMenigall who is a senior member of Aberdeen's global equities team.

4 AllianceBernstein

4.1 AllianceBernstein announced in March 2008 that they have decided to close their Global Strategic Value product to new business. This is the product used for the Hampshire global equities portfolio. They will continue to accept normal additional cash flows from existing clients such as Hampshire, although amounts over £50m will be considered on a case-by-case basis. They have also closed two other Strategic Value products.

4.2 This decision follows AllianceBernstein's success in attracting new clients over the years, including Hampshire. It reflects a view that there is a maximum capacity at which they can be sure that their investment process will be successful. AllianceBernstein consider that they have taken a conservative approach in closing these products now.

4.3 George Blunden from AllianceBernstein has assured the County Treasurer that this decision is not connected in any way with the credit crisis or with the portfolio's recent poor performance in 2007 during a period when markets have been unfavourable for their `deep value' investment style.

4.4 In the longer term, this decision could be positive for Hampshire as it should protect the portfolio from dilution of AllianceBernstein's investment approach which has proved very successful in the past. George Blunden will be able to answer any questions on the decision at this meeting of the Panel.

5 Société Générale

5.1 The County Treasurer circulated to Panel members in January 2008 a communiqué from the Chairman of the Société Générale Group concerning the losses suffered as a result of the activities of the `rogue trader' Jerome Kerviel. Société Générale are the parent company of the fund manager SGAM who manage a UK equities portfolio for the Fund.

5.2 Subsequently, SGAM's Keith Percy has reassured the County Treasurer that these rogue trading activities and the losses have had no impact on SGAM's management of the Hampshire portfolio. There remains a possibility, however, that Société Générale could be subject to a takeover or a merger. The future of SGAM in those circumstances might then depend on whether the other institution involved also has a London-based fund management business.

5.3 Keith Percy will be able to update the Panel when he attends the Panel's meeting on 23 May 2008.

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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