States of Jersey Investment Strategy: Amendment

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A decision made on 28 November 2014:

Decision Reference: MD-TR-2014-0141
Decision Summary Title:	Amendment to the States of Jersey Investment Strategy Document		Date of Decision Summary:	26 November 2014
Decision Summary Author:	Head of Treasury and Investment Management		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title:	Amendment to the SOJ Investment Strategy Document		Date of Written Report:	26 November 2014
Written Report Author:	Head of Treasury and Investment Management		Written Report : Public or Exempt?	Public
Subject: Amendment to the States of Jersey Investment Strategies and presentation to the States.
Decision(s): The Minister approved the amended ‘States of Jersey Investment Strategies’ and decided to present the updated document to the States.
Reason(s) for decision:. In compliance with Paragraph 3 of the Public Finances (Transitional Provisions) (No. 2) (Jersey) Regulations 2005, detailed investment strategies are maintained within the ‘States of Jersey Investment Strategies’ for all monies to which Chapter 1 of that regulation applies. These Investment strategies include a strategic asset allocation detailing the allotment of monies across investment classes. Paragraph 4 of the same regulation, states that as soon as practical after the Minister has prepared the investment strategy, or any review of it, the Minister must present it to the States. The Strategy of the Housing Development Fund (‘HDF’) is under review following receipt of updated drawdown assumptions proposed by Andium as well as updated figures reflecting the achieved rates on the issued bond and rates to be charged on issued loans. Due to the higher proportion of the fund being drawn down over a very short period, holding equity significantly increases the chance of the portfolio becoming insolvent as the fund will have insufficient time to recover from any potential losses. While a full strategic review is performed, the investment advisor has recommended crystallising gains from some existing classes which moves our allocation away from the strategic range. To allow the Treasury to act on such advice the following line has been added to the HDF strategy while the strategy is reviewed and updated: “The Investment Strategy of Housing Development Fund is subject to a rolling quarterly re-assessment process, in line with the recommendations of the States of Jersey Investment Advisor, as published on p99 of the 2015 draft budget statement. Consequently, under advice from the States of Jersey Investment Advisor, the Fund is permitted to periodically crystallise gains made by asset classes or make strategic allocations which can result in short term movements away from published strategy.”
Resource Implications: None
Action required: Greffier of the States is requested to present the attached report to the States Treasury and Investment Management Team to ensure changes are implemented.
Signature:		Position: Senator A J H Maclean, Minister for Treasury and Resources
Date Signed:		Date of Decision:

States of Jersey Investment Strategy: Amendment

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Treasury and Resources

Ministerial Decision Report

Amendment to the States of jersey Investment Strategy

Purpose of Report

Amendment to the States of Jersey Investment Strategies and presentation to the States.

Background

In compliance with Paragraph 3 of the Public Finances (Transitional Provisions) (No. 2) (Jersey) Regulations 2005, detailed investment strategies are maintained within the ‘States of Jersey Investment Strategies’ for all monies to which Chapter 1 of that regulation applies. These Investment strategies include a strategic asset allocation detailing the allotment of monies across investment classes.

Paragraph 4 of the same regulation, states that as soon as practical after the Minister has prepared the investment strategy, or any review of it, the Minister must present it to the States.

Amendments to the States of Jersey Investment Strategy Document:

The Strategy of the Housing Development Fund (‘HDF’) is under review following receipt of updated drawdown assumptions proposed by Andium as well as updated figures reflecting the achieved rates on the issued bond and rates to be charged on issued loans.

Due to the higher proportion of the fund being drawn down over a very short period, holding equity significantly increases the chance of the portfolio becoming insolvent as the fund will have insufficient time to recover from any potential losses. While a full strategic review is performed, the investment advisor has recommended crystallising gains from some existing classes which moves our allocation away from the strategic range.

To allow the Treasury to act on such advice the following line has been added to the HDF strategy while the strategy is reviewed and updated:

“The Investment Strategy of Housing Development Fund is subject to a rolling quarterly re-assessment process, in line with the recommendations of the States of Jersey Investment Advisor, as published on p99 of the 2015 draft budget statement. Consequently, under advice from the States of Jersey Investment Advisor, the Fund is permitted to periodically crystallise gains made by asset classes or make strategic allocations which can result in short term movements away from published strategy.”

Recommendation

It is recommended the Minister approve the amended ‘States of Jersey Investment Strategies’ document and request the Greffier of the States to present the report to the States.

Reason for Decision

Paragraph 4 of the same regulation, states that as soon as practical after the Minister has prepared the investment strategy, or any review of it, the Minister must present it to the States.

Resource Implications

None

Report author : Head of Treasury and Investment Management	Document date : 26 November 2014
Quality Assurance / Review : Director of Treasury Operations	File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DSs, WRs and SDs\2014-0141 - Updated Investment Strategy Nov 2014\WR - Updated Investment Strategy Nov 2014.doc
MD sponsor : Director of Treasury Operations