The Pension Fund Committee of Waltham Forest Council met on Thursday 10 February 2011 to review the council's investment strategy and consider fund performance. Key decisions included a significant shift in asset allocation, reducing exposure to equities and increasing investment in alternative assets.

Investment Strategy Review

The committee agreed to adopt a new Strategic Asset Allocation for the Pension Fund's investments, aiming to achieve better long-term returns while reducing risk. The total value of the fund's investments is approximately £500 million. The previous allocation of 74% to equities was deemed too risky, particularly in light of market events in 2008 and 2009.

The new Strategic Asset Allocation is as follows:

• Equities: 59% (reduced from 74%)
• Fixed Income (Bonds): 15%
• Alternatives (Property, Global Tactical Asset Allocation, Infrastructure, Hedge Funds): 26% (increased from previous levels)

Within the equity allocation, the split between UK and Overseas equities will be between 40% and 60%, with up to 15% in emerging markets. Initially, this will be set at 60% UK equities and 40% Overseas equities. AXA Framlingham will be retained as the Fund's UK Equities manager. A formal review of BankInvest will be undertaken, with a report to be presented to the committee in November 2011. Fixed income investments will be positively utilised as a potential source of return.

The existing strategic allocation of 8% in property will be maintained, with worldwide geographic investment now authorised. The fund will continue its investment in Global Tactical Asset Allocation with Nordea at 3% of the fund. A strategic allocation of 10% will be made to infrastructure investment, and 5% to hedge fund investment, with the potential to increase this to 8% if the fund disinvests from Global Tactical Asset Allocation. The committee decided not to make a strategic allocation to a Diversified Growth Fund. The Director of Finance, in consultation with the Chair of the Committee, will have the discretion to determine the precise strategic allocation of the fund to UK and Overseas equities, including emerging market equities, within the set boundaries.

Presentations from Fund Managers

Members received presentations from the managers of two property funds. Paul Harris and Justin Brown from UBS Global Asset Management presented on the Triton (UK) Property Fund. They discussed the general economic situation, predicting a slow recovery from the recession, possibly tax-led, and no double dip . The Triton fund comprises UK property across various sectors, with south-east office space and out-of-town retail identified as offering the best returns.

Wendy Olsen and Martin Gilbert from DTZ Aurora presented on their European Property Fund. This fund invests in European property funds rather than individual properties. It was noted that the fund appeared to have limited exposure to the German industrial sector, which could be strengthened. The fund's strategy involves identifying weak areas with the belief that they will strengthen and provide good returns.

Pension Fund Performance Monitoring and Rebalancing

A report was presented detailing the overall fund position and investment performance of fund managers for the fourth quarter of 2010. This included an assessment of asset allocation relative to the benchmark, to inform decisions on rebalancing options. Members also received details of the overall fund performance for the quarter ending 31st December 2010, and for the preceding year. The committee noted the report from WM Performance Services on overall Pension Fund performance and agreed that no rebalancing between portfolios was recommended at that time, pending the outcome of the investment strategy review.

Additional Meetings and Committee Dates

The Director of Finance reported on the necessity to arrange three additional meetings to appoint a Bond Manager, an Actuary, and an Investment Consultant. Members agreed that these meetings would be held on 11 May, 8 June, and 20 June 2011. The proposed dates for the Pension Fund Committee meetings in the 2011/2012 municipal year were also noted: 26 September 2011, 28 November 2011, and 5 March 2012.

Local Authority Pension Fund Forum

Members received details of the business meeting of the Local Authority Pension Fund Forum (LAPFF) held on 26 January 2011, along with a synopsis of its outcomes.