What was the advice that councillors in charge of governance of the Merseyside Pension Fund were given about a Democratic majority in United States Congress and its impact on North American investments?
What was the advice that councillors in charge of governance of the Merseyside Pension Fund were given about a Democratic majority in United States Congress and its impact on North American investments?
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The public meeting of Wirral Council’s Pensions Committee held on the 16th November 2015
I will start this piece by declaring that I have a close family relative paid a pension by the Merseyside Pension Fund.
Monday night’s public meeting of Wirral Council’s Pensions Committee (you can view the video above) chucked out the public for two agenda items (issues about the tender exercise for CB Richard Ellis Capital Advisers Ltd (CBRE) and the minutes of the Investment Monitoring Working Party meeting of the 17th September 2015 and the 8th October 2015.
Originally one of the governance policies agreed by councillors that run the Merseyside Pension Fund stated that minutes of the Investment Monitoring Working Party and Governance Working Party should be published. I did query a while back why they weren’t, which led to the situation now where the minutes are split on the agenda and the public gets to see which councillors turned up, who sent their apologies and what the declarations of interest are.
However the rest of the minutes of those meetings (despite it being councillors that sit on these committees), councillors decide to keep the rest of the minutes a secret (on the advice of Wirral Council officers).
As it states on Wirral Council’s website the law states “Information is exempt to the extent that, in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information” and the reason given on Monday evening was “Information relating to the financial or business affairs of any particular person (including the authority holding that information)”.
Strictly speaking politicians are supposed to carry out their own public interest test based on the above and I suppose I should kick up more of a fuss at this point of the meeting if they’re about to chuck us out for no reason.
The Merseyside Pension Fund is a large pension fund with billions of pounds invested. Of course as a member of the press I’m going to take a view that it’s wrong for the public sector to be engaging in these inappropriate levels of secrecy when the total number of people in the fund comes to over 100,000.
Actually persuading politicians to actually go against an officer recommendation on this though is probably beyond my powers of persuasion. So here is a leak instead of the Investment Monitoring Working Party minutes of 8th October 2015. Think of all the money I’ve saved Wirral Council by not making a FOI request for this (although no doubt they will now carry out another leak investigation!)
I’ve corrected Cllr Ann McLachlan’s name in section 1 which was misspelt as McLachalan.
NOT FOR PUBLICATION
By virtue of paragraph(s) 3 of Part 1 of Schedule 12A
of the Local Government Act 1972.
EXEMPT APPENDIX 2
Minutes of the Investment Monitoring Working Party,
8 October 2015
Councillor Ann McLachlan (WBC) (Vice Chair)
Peter Wallach (Head of MPF)
Councillor Geoffrey Watt (WBC)
Joe Blott (Strategic Director Transformation and Resources
Councillor Treena Johnson (WBC)
Noel Mills (Independent Adviser)
Rohan Worrall (Independent Adviser)
Councillor Paulette Lapin (SC)
Louise-Paul Hill (Aon Hewitt)
Emma Jones (PA to Head of Pension Fund)
Apologies were received from:
Councillor Paul Doughty (WBC)
Councillor Brian Kenny (WBC)
Councillor Cherry Povall (WBC)
Councillor George Davies (WBC)
Councillor John Fulham (SHC)
Councillor Adrian Jones (WBC)
Declarations of Interest
Councillor Geoffrey Watt declared an interest due to a relation being a beneficiary of the Merseyside Pension Fund.
Cllr Ann McLachlan (AM) chaired the meeting on behalf of Cllr Paul Doughty.
2. External Manager Presentation
2.1 M&G Investments
Matthew Vaight (MV), Fund Manager and Orla Haughey (OH), Client Director, presented their global Emerging Markets Mandate to IMWP. Their agenda covered their mandate, market overview, a re-cap on their process, performance and finally their funding positioning.
Merseyside Pension Fund current holdings are valued at £112.8m. They briefed members on their bottom-up stock picking style and currently hold 50-70 stocks on behalf of the Fund.
A discussion ensued with regard to the risk in developed markets compared to emerging markets but MV argued that although a portfolio could remain cautious there are improving fundamentals in countries such as Taiwan for example which still offer opportunities as markets on cheaper valuations.
Specific risks of stocks and value was examined and how specific risks can be stock specific rather than country specific. However the sharp currency devaluations in some markets such as Brazil and Russia over the past 12 months had hit the fund’s performance where stock fundamentals had been overridden by the market’s performance. Oil prices were discussed and how this affected the markets. To further mitigate risks M&G said they have also developed a framework to look at currency which will further aid stock selection.
Questions were raised with regard to governance and M&G clarified how they work with particular companies and examine management within the organisation closely.
Ethical investments were discussed and M&G clarified they have no exposure in tobacco products or defence. M&G explained their view is that good corporate governance is an indication of quality management and is a good indicator of how a company is run. It combined to make an attractive investment and is integral to their analysis of a company.
3. External Manager Presentation part 2
3.1 Maple-Brown Abbott
Geoff Bazzan (GB), Head of Asia Pacific Equities, and Susan Douse (SD), European Marketing and Client Services, presented at IMWP an overview of their organisation. They spoke about their value style and investment process and philosophy. They looked at their total performance up to 31 August 2015 and the major contributors and detractors during that period.
A discussion ensued with regard to their cyclical turn down and the classic value trap over the long term. The Chinese economy was discussed and the fact that GB believes there is still opportunities in China but be wary of companies exposed to too much US debt.
Maple-Brown Abbott’s asset allocation and in particular their specific stock selection was debated and how this has impacted on performance. GB asserted that there has been a slight improvement in performance and hopes to see this improving in the future. GB expressed the view that exposure of Chinese stocks will improve.
Maple-Brown Abbott were asked about their ethical investments and it was asserted that restrictions are imposed on companies but in the broader portfolio they do not screen out but look at the sustainability over the long term and subsequently ethical questions come into play.
External Manager Presentation part 3
Mickaël Tricot (MT), Head of Emerging Markets Equities and Peter Brackets (PB) presented the Amundi Actions Emergent Team, Process and Portfolio Review to the IMWP. MT gave Merseyside’s portfolio’s investment summary and talked about the team structure and its resources. MT explained that they combined a top-down and bottom-up featured approach which supported a high quality stock selection process which was well suited for emerging markets with higher volatility.
Ethical investments were discussed and MT asserted this was very subjective but they coupled this with knowing the companies and looking carefully at aspects of the organisation thoroughly. MT explained that although aspects of ethical investments were not mandatory, companies were coming under pressure from the stock exchange to comply with guidelines. This was becoming very important and companies are finding it beneficial to conform.
The question of how the stock exchange can apply pressure was discussed and it was stressed that there was a common current exchange of disclosure and reporting which raises issues when concerns are expressed. It was also argued that collaboration and initiatives within global firms have a consistent framework which can put pressure on managers to comply. There are also the UN PRI principles which encourage disclosure.
Amundi’s exposure in Brazil and currencies was discussed and value versus growth was debated further. Amundi noted they were always looking at changing their approach to look at more complex valuations by using supplementary tools and databases to help with analysis.
5.1 Noting items
5.2 Action Points
5.3 Summary of Recommendations
5.4 Discussion Points (including any other business)
Date of Next Meeting
Thursday 10 December 2015 at 10.00 am, 6th floor, Cunard Building.
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Cllr Phil Davies answered the seven questions as follows, “Thank you Mr Mayor. Cllr Green has asked me about rumours circulating et cetera, I’ve got nothing to add to the email from the Chief Executive issued to all Members of the Council on the 7th October.
To Cllr Denise Roberts, the visit to China, yes I was actually delighted that our Government sent out a high powered delegation of actually six politicians, the Chancellor of the Exchequer, four Government Ministers (I’m not sure who the Government Ministers are) and the Mayor of London together with civil servants and business people. And you know the serious point about this is that, and I again I applaud George Osborne, because he I think quite rightly in a speech he made this morning, did comment on the importance of increasing the links with China as a global market which is growing aggressively and we need to in Britain I think we need to be very mindful of that and try and use every opportunity we can to ensure that our residents benefit from investment, jobs which can be secured from that growing economy and I was delighted to be part of the delegation which visited China recently.
I know the Leader of the Opposition Cllr Green and the former Leader of the Liberal Democrats Cllr Harney have also been out to that country and the scale of progress is absolutely staggering. It really is the pace of the recruitment and the government there have a policy now of encouraging their companies to look at Western countries to invest in and therefore I think it’s essential actually for the local authorities to take advantage of these opportunities to secure jobs and investment. The International Trade Centre, Wirral Waters and the opportunities that exist within our offshore wind sector were two of the areas that we, I certainly focused on while I was over in China.
In terms of just while I’m on my feet, Cllr Blakeley, the reason why I didn’t mention the school links, it was literally a proposal that we handed to the Mayor of Taicang for a school teacher exchange program which they’d expressed an interest in. So it was an element of the visit but the two main reasons to go out there was one to support Peel on getting jobs and investment in the ITC and secondly to get wind power companies to look at doing a partnership with Cammell Lairds. So it wasn’t the main element but it was an element.
And the issue about gifts, again as the other leaders who’ve been out to China will testify, it is protocol that when you visit China you exchange gifts, we’ve done that on previous visits and when delegations come over here they’ve done that. We took over some gifts which unfortunately got stuck in Chinese customs, they’ve come back at no extra cost to the Council and indeed we will use them because we’re expecting a delegation from China to visit us in the next couple of months so they will be used.
Stuart Kelly asked about the the SME contractors that we use and making sure that we report back on the ten day target. Stuart I’ve not forgotten that, the report’s not been completed yet for Cabinet. It’s my intention that that will still be tabled, I’m not exactly sure when but I give you my assurance that I will check with the relevant officer and drop you a note exactly when that is expected to come to Cabinet.
OK, Stuart Wittingham, I’ve dealt with Chris Blakeley’s questions, Stuart Wittingham, yeah Stuart I think all those I’m delighted to thank all the elected Members who attended the second annual conference at the Floral Pavilion on Saturday. Obviously some groups were, some Members were unable to attend and you know I understand that there were other commitments. However, I think those people who were there, I certainly got very good feedback about the event.
We had two very good speakers, one the Chief Exec of the LGA and one the Chair of Local Government Association Improvement Board and I think we had a good debate about the future model for the full Council in the next few years. I wanted to stress that this is the start of a debate and there’ll be other opportunities, Scrutiny Committees, in individual groups before we have our policy Council at the start of December where we will revisit our Corporate Plan, so I think that was a very … day and again I’m very grateful to officers and Members and our partners in that.
Right onto Cllr Hodson, again Wirral Waters and the ITC I think I’ve emphasised how important that is for the future economic prosperity of Wirral. On his invitation to congratulate Esther McVey on her promotion … I mean clearly on a personal level I will say congratulations, however I sincerely hope her record on employment is much more successful than the horrendous cuts that’s she’s presided over.
Disabled people in this country are some of the poorest groups in this country. I hope, I sincerely hope that she uses that position to persuade George Osborne that he’s got the policy direction in terms of the economy completely and utterly wrong and he needs to rethink now. And then finally Mr Mayor, Mark Johnston asked me about the progress on the International Trade Centre scrutiny report which he was involved in when he was Chair of that particular scrutiny committee.
I can tell Mark that clearly as I’ve mentioned the ITC does remain a key priority for the Council working with our colleagues in Peel. I think we’ve offered significant support to and that continues to Peel including the use of Birkenhead Town Hall as a key visitor’s centre for overseas visitors. An internal working group of officers has been set up Mark to take forward the recommendations from the scrutiny committee’s report and various actions have been allocated across Council departments depending what each recommendations are to ensure that a rapid start can be made once the actual development has, we’re expecting construction to start in the early part of 2014.
At the moment businesses are being signed up over in China, some of the actions do have resource requirements and you know we need to look at that in the context of the Budget and I think it is more appropriate to undertake that at a point just before development starts. The trigger point for implementing the actions from the scrutiny report will be receipt of the reserved matters application, phase 1 of the ITC, but I’ve been assured, because I’ve asked a question and you’re kind enough to give me notice that you’re bringing this up tonight so thank you for that Mark.
Officers have assured me that they will pull together the cross party working group very soon indeed, in the next couple of months, so Members that were involved in that piece of work can ensure themselves that you know progress is being made against each of the recommendations in the report, that answers the question.”
Cllrs Rennie, Niblock, Roberts and Stapleton declared a personal interest in item 11 (Recommendation from the Regeneration and Environment Policy and Performance Committee) as Wirral Council’s representatives on the Mersey Fire and Rescue Authority.
Cllr Les Rowlands presented a petition of seventy-four households opposed to the proposal to sell off public land on the corner of Boundary Lane and Telegraph Road.
Cllr Stuart Kelly presented a petition of a hundred and eight residents asking for improvements to the lighting on the pathway from the Holmlands area to Woodchurch High School and Woodchurch Leisure Centre.
Cllr Philip Brightmore presented a petition of two hundred and thirty-seven households asking for something (sadly the rest of what Cllr Brightmore said about that petition was unclear).
Cllr Pat Hackett presented a petition of one hundred and eight people from the Field Road Residents Association in New Brighton objecting to the Council selling a car park.
The Mayor invited the Leader of the Council to introduce his report. Cllr Phil Davies said that his report covered five main areas. These areas were the future Council model and vision, the Budget, European funding (Wirral Council were going to submit a judicial review on this matter), the progress of the Liverpool City Region Combined Authority application and his recent visit to China.
Cllr Jeff Green asked the first question to Cllr Phil Davies. His question was, “Given the Council’s Budget position, as set out in this report, is the Leader of the Council aware of the rumours circulating around a £48,000 compensation payment made to a serving Council officer and does he know what that payment was for?”
Cllr Denise Roberts asked, “Would the Leader of the Council join with me in congratulating the Chancellor of the Exchequer for following Wirral’s example by leading a trade delegation to China and declaring he wants Britain to share in China’s economic progress?”
Cllr Stuart Kelly asked, “In the Leader’s report he talks about working in partnership with strategic partners such as business. At the Council meeting on the 15th July, the Leader will recall that I asked him whether he was aware that the policy of payments to small and medium-sized enterprises within five days was being quietly abandoned by officers. In his reply to me in July, the Leader was clear that the policy had not been abandoned by him or the Administration but also does he recall in his answer saying that he had and I quote ‘asked for a report to be presented to the Cabinet by the Strategic Director for Regeneration and Environment detailing what support is in place to ensure SMEs continue to survive and grow which would include information regarding payment times’? I’d ask the Leader Mr Mayor what has happened to that report and how is Council performing against the five-day payment times?”
Cllr Chris Blakeley asked, “My question is about the visit to China. Mr Mayor, we’re informed a key theme of the latest visit was to develop educational links between the young people of Wirral and the young people of China. Can the Leader of the Council tell us why that key theme does not appear in his report because he’s covered everything else (developing education links)? Mr Mayor, I think I … to update councillors on the status of the gifts that travelled halfway round the world and back.”
Cllr Stuart Wittingham asked, “Can I express my thanks to all those involved in organising the second Wirral Council annual conference which was held at the Floral Pavilion on Saturday? Can I ask the Leader of the Council to emphasise the importance of all elected Members to engage in the discussion about developing a model and vision of how the Council operates in future?”
Cllr Andrew Hodson asked, “I was delighted to read of the ongoing progress of the Wirral Waters site and will he be joining me in congratulating Esther McVey on her recent promotion as Employment Minister and place on record his thanks to her for her endeavours to secure Enterprise Zone status for Wirral Waters?”
Cllr Mark Johnston asked, “My question is in relation to point five in the report and the International Trade Centre. Firstly I would like to applaud the Council for its outward looking approach to inward investment, however I note that all three party leaders have all been out to Taicang, China on separate visits. My question relates to the progress on the recommendations made under a scrutiny review looking at the International Trade Centre, especially the agreement reached to explore a cross party working party to make sure the recommendations were carried through. I haven’t seen any progress on that yet, thank you.”
The Mayor asked the Leader of the Council, Cllr Phil Davies to answer those questions.