Investment Performance Report for six months ended 30 June 2010

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A decision made 1 November 2010 regarding: Investment Performance Report for six months ended 30 June 2010.

Decision Reference: MD-TR-2010-0153
Decision Summary Title:	Presentation of the Investment Performance Report for the six months ended 30 June 2010		Date of Decision Summary:	25 October 2010
Decision Summary Author:	Head of Investment Management		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title:	Presentation of the Investment Performance Report for the six months ended 30 June 2010		Date of Written Report:	25 October 2010
Written Report Author:	Head of Investment Management		Written Report : Public or Exempt?	Public
Subject: Presentation of the Investment Performance Report for the six months ended 30 June 2010 to the States
Decision(s): The Minister for Treasury and Resources decided to present the attached Investment Performance Report for the States main funds to the States for their information.
Reason(s) for decision: The Minister has decided to present the attached Investment Performance Report in accordance with his investment strategies published on 22 June 2010 (R.C. 84/2010)
Resource Implications: Other than those detailed in the report there are no further financial or manpower Implications.
Action required: The Greffier of the States to be requested to make arrangements to present the attached Investment Performance Report to the States.
Signature:		Position: Senator P. F.C. Ozouf, Minister for Treasury and Resources
Date Signed:		Date of Decision:

Investment Performance Report for six months ended 30 June 2010

STATES OF JERSEY INVESTMENT PERFORMANCE REPORT

FOR THE 6 MONTHS ENDED 30 JUNE 2010

STATES OF JERSEY INVESTMENT PERORMANCE REPORT

FOR THE 6 MONTHS ENDED 30TH JUNE 2010

1. Introduction

1.1. This report covers the performance of the main States of Jersey Funds’ Investments for the 6 months ended 30th June 2010. Funds included in this report are:-

· The Strategic Reserve Fund

· Stabilisation Fund

· Social Security (Reserve) Fund

· Health Insurance Fund

· Consolidated Fund

· Public Employees Contributory Retirement Scheme (PECRS)

· Teachers’ Superannuation Fund (JTSF)

· Currency Notes and Coins Fund

2.

2.1. The latest States Investment Strategy published was on 22nd June 2010 (R.C 84/2010), including overarching strategies for ethical investments and governance arrangements.

2.2. The Minister’s oversight of investment matters is currently supported by an Investment Sub Committee. As part of the on-going drive to improve all aspects of financial management across the States, the Minister intends to replace the Sub Committee with a Treasury Advisory Panel to include independent non-executive members with relevant experience. The Panel will be responsible for advising the Minister and Treasurer on a range of treasury matters. The Minister and Treasurer will continue to receive independent investment advice from the States Investment Adviser, currently Aon Hewitt. The Terms of reference for the Treasury Advisory Panel are attached to this report at Appendix 2.

2.3. On 1st July 2010 the States of Jersey - Common Investment Fund (CIF) was implemented to provide many of the States Funds, including Special and Trust & Bequest Funds, the opportunity to pool resources in order to benefit from greater investment opportunities and economies of scale. Each fund holds units in the CIFs asset pools in line with their individual investment strategies. Ten funds joined the CIF on 1st July, which included four of the larger Trust & Bequest Funds. This represents phase 1 of the CIF and implements some of the recommendations laid out in Comptroller and Auditor General’s report “The Lord Portsea Gift Fund and other Special Funds” dated June 2009. Further Trust & Bequest Funds joined the CIF in the third quarter of 2010 (Phase 2 of the CIF) and the remaining funds with significant investment balances will join the CIF during the first half of 2011.

2.4. On the 1st October AXA Rosenberg Investment Management Ltd was terminated as an equity manager for the States of Jersey - Common Investment Fund and three new equity managers were appointed. Also on this date the Social Security (Reserve) Fund placed funds in the CIF in line with its published investment strategy.

2.5. Each fund has its own Investment Strategy and asset allocation, some focusing on long term return and others on short term liquidity and security.

3. Investment Performance

3.1. Investment Performance of the major States of Jersey funds is compared to the relevant benchmarks for each fund. Specific benchmarks and out performance targets are set for each Investment Manager.

3.2. Actual performance is measured against the relevant benchmark and is dependent on market conditions.

3.3. The following table shows the number of investment managers in place as at 30th June 2010, for each of the major funds:-

Table 1: Managers in place as at 30th June 2010

Number of Managers in place	Equities	Alternatives	Property	Bond/Cash

States of Jersey Major Funds
Strategic Reserve Fund	1	-	-	2
Stabilisation Fund	-	-	-	1
Social Security (Reserve) Fund (1)	1	-	-	-
Health Insurance Fund	-	-	-	1
Consolidated Fund	-	-	-	1
Currency Notes and Coins Fund	1	-	-	3
PECRS (2)	5	2	1	6
JTSF	1	-	1	1

(1) Social Security (Reserve) Fund currently invests in pooled funds with Legal & General

(2) PECRS includes investment in pooled funds with Legal & General for equities and bonds.

3.4. The performance of the individual funds as at 30th June 2010 is summarised in the table below.

Table 2: Individual Fund performance results as at 30th June 2010

Fund	Value (30/6/10) £’million	Actual Performance 6 months	Actual Performance 1 Year	Actual Performance 3 Years

Strategic Reserve Fund	551	0.29%	9.64%	3.55%
Stabilisation Fund	114	0.52%	1.13%	-
Social Security (Reserve) Fund	717	-1.93%	19.66%	-0.76%
Health Insurance Fund	76	0.39%	-	-
Consolidated Fund (including Trading Funds)	230	0.44%	1.03%	3.86%
Currency Notes and Coins Fund	83	0.46%	3.60%	3.60%
PECRS	1,163	-2.21%	15.78%	-0.51%
JTSF	272	0.25%	24.82%	1.20%

3.5. Appendix 1 provides an analysis of the performance and current asset allocation for each fund.

1. Overview

1.1. The Minister for Treasury and Resources and Treasurer of the States have a range of powers and responsibilities relating to Treasury matters, provided for through the Public Finances (Jersey) Law 2005 and associated Regulations. The Treasury Advisory Panel is established by the Minister to provide advice on discharging these responsibilities and exercising relevant powers.

2. References

2.1. References to "the Minister" shall mean the Minister for Treasury and Resources

2.2. References to "the Panel" shall mean the Treasury Advisory Panel

2.3. References to the “Non Executive Members” shall mean the members of the Panel appointed by the Minister.

3. Constitution

3.1. The Panel shall be established by the Minister to advise the Minister, Assistant Minister(s) and Treasurer. The Minister shall appoint members and a Chairman.

4. Authority

4.1. The Panel is empowered by the Minister to discharge its functions as specified in this document. To achieve this the Panel shall:

· Have the right to seek and be provided with the necessary information to fulfil its duties

· Have the right to request professional advice necessary to fulfil its duties

5. Membership

5.1. The Panel shall comprise Treasury Officers and Non Executive members. In total, between four and six members, as follows:

· Treasury Officers

The Treasurer of the States of Jersey;

The Deputy Treasurer of the States of Jersey

· Non Executive members

Between 2 and 4 Non Executive Members with relevant experience, appointed by the Minister

5.2. The Minister and Assistant Ministers for Treasury and Resources shall have the right to attend all Panel meetings.

5.3. The Minister and Assistant Ministers for Social Security, and their nominated officers, shall have the right to attend all Panel discussions that impact on Social Security Funds.

5.4. A Treasury officer shall be appointed the secretary of the Panel.

5.5. The appointment of the Non Executive Members shall be made by the Minister in accordance with the Appointments Commission procedures and after consultation with the Minster for Social Security, the Chairman of the Panel and Treasurer of the States.

5.6. The appointment of a Panel Chairman shall be made by the Minister in accordance with the Appointments Commission procedures and after consultation with the Minster for Social Security, the Chairman of the Panel and Treasurer of the States.

5.7. Appointment of Non Executive members to the Panel shall be for a period of no more than five years years. Non Executive members may be reappointed subject to the Appointment Commission’s procedures for a maximum of two periods of five years.

6. Meetings

6.1. The Panel shall meet as appropriate, as determined by the Chairman, but not less than three times per year.

6.2. A meeting of the Panel may be called by the secretary at the request of any member of the Panel or the Minister.

6.3. Only members of the Panel, the Minister and the Minister for Social Security have the right to attend Panel meetings. Other individuals and external advisers may be invited to attend for all or part of any meeting as and when appropriate.

6.4. Unless otherwise agreed, notice of each meeting confirming the venue, time and date together with an agenda of items to be discussed, and shall be forwarded to each member of the Panel and any other person required to attend, at least five working days prior to the appointed day for the meeting. Supporting papers shall be sent to Panel members and to other attendees as appropriate, at the same time.

6.5. The quorum for Panel meeting shall be three members, including at least one Treasury officer and one Non Executive member. A quorate meeting is able to provide advice to the Minister will the authority of the full Panel.

6.6. In the absence of the Chairman and/or an appointed deputy, the remaining members present shall elect one of themselves to chair a meeting.

6.7. The secretary will minute the proceedings and advice / recommendations of all meetings.

6.8. The secretary shall ascertain, at the beginning of each meeting, the existence of any conflicts of interest and minute them accordingly.

6.9. Minutes of the Panel meetings shall be circulated promptly to all members of the Panel. Once agreed the minutes or a summary thereof shall be circulated to the Minister and the Minister for Social Security.

6.10. Meetings may be conducted in person, via telephone, or electronically.

7. Terms of Reference

7.1. The Minister for Treasury and Resources and Treasurer of the States have a range of powers and responsibilities relating to Treasury matters, provided for through the Public Finances (Jersey) Law 2005 and associated Regulations.

7.2. The Panel is established to advise the Minister and Treasurer on relevant Treasury matters.

7.3. The Panel is required to provide advice on the following matters on an on-going basis. The Minister or Treasurer may also request the Panel to provide advice on other relevant Treasury matters.

Scope of Advice

7.4. Treasury Policy, in the second half of 2010 the Treasury department is developing a comprehensive policy on key treasury activities including management of risk. The Panel is requested to consider the initial policies and advise the Minister on their adoption. The Panel will be required to review the appropriateness of these policies annually.

7.5. Fund Investment Strategies, the Minister has published investment strategies for each of the major funds managed by the Treasury. The Panel is required to review the appropriateness of these strategies annually.

7.6. Common Investment Fund Strategies, the Minister has published investment strategies for each of the Common Investment Fund pools. The Panel is required to review the appropriateness of these strategies annually.

7.7. Investment performance, the Panel is required to review and consider the performance of all investment / cash managers appointed to manage funds under control of the Minister or Treasurer, at least annually.

7.8. Appointment and dismissal of Investment Managers, the Treasurer is responsible for the appointment of investment managers. The Panel is required to advise the Treasurer on the appointment and dismissal of investment / cash managers.

7.9. Currency and Interest rate exposure, through its operations the States has on occasion exposure to foreign currencies and interest rate changes. The Panel is required to advise the Treasurer and Minister on the management of these exposures as requested.

7.10. Other Advice. From time to time, the Minister and Treasurer may wish to seek the Panel’s advice on other treasury matters. The Panel will be required to advise on matters where it has relevant expertise, experience and knowledge to do so.

7.11. The Panel shall operate in accordance with the Principles and Recommendations of the AIC Code of Corporate Governance and States of Jersey Code of Conduct to the extent that the Principles and Recommendations are relevant to the fulfilment of its duties.

8. Reporting and Communication

Advice

8.1. All advice provided by the Panel to the Minister or Treasurer will be given formally, and confirmed either through the Panel’s minutes or by correspondence from the Chairman.

8.2. Advice will normally be given on unanimous agreement of the Panel. Where such agreement is not reached the Chairman must inform the Minister and Treasurer of the Panel members’ views.

8.3. The Minister will consider the advice of the Panel and will respond to that advice, indicating his acceptance or otherwise of the advice.

Reporting and Communication

8.4. The Panel shall receive copies of relevant Ministerial Decisions.

8.5. The Panel shall receive copies of monthly and six monthly investment performance reports from the Treasury.

8.6. The Panel shall prepare, by 30 April each year, an annual Report for the Minister covering the activities of the Panel in the previous calendar year. The report shall set out the following matters:

· The Membership of the Panel;

· The number of meetings held since the publication of the previous Annual Report;

· The significant advice given to the Minister during the year;

· An overview of investment performance;

8.7. The report shall be prepared so as to enable the Minister to present it to the States Assembly.

8.8. The Panel will meet formally with the Minister at least once a year to discuss the activities of the Panel and its performance.