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A decision made 31 October 2011:

Decision Reference: MD-TR-2011-0132
Decision Summary Title:	Presentation of Revised States Investment Strategies		Date of Decision Summary:	28 October 2011
Decision Summary Author:	Treasurer of the States		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title:	Presentation of Revised States Investment Strategies		Date of Written Report:	28 October 2011
Written Report Author:	Head of Investment Management		Written Report : Public or Exempt?	Public
Subject: Presentation of revised Investment Strategies to the States by the Minister for Treasury & Resources.
Decision(s): The Minister for Treasury and Resources decided to amend the Investment Strategies for the various States Funds as in Appendix A.
Reason(s) for decision: The Minister’s Investments Sub-Committee and professional advisers have recommended some changes to the existing Investment Strategies. The Treasury and Resources Minister has consulted with the Minister for Social Security concerning the Investment Strategies for the Social Security (Reserve) Fund and the Health Insurance Fund. Article 4(1) of the Public Finances (Transitional Provisions) (No. 2) (Jersey) Regulations 2005 states: “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.” Article 4(2) of the Public Finances (Transitional Provisions) (No. 2) (Jersey) Regulations 2005 states: “The Minister and the Treasurer may invest money to which this Chapter applies – (a) to the extent and in the manner set out in the investment strategy presented to the States; but (b) where that strategy has been reviewed, to the extent and in the manner set out in the last review of the strategy presented to the States.”
Resource Implications: Other than those detailed in the report there are no further financial or manpower Implications.
Action required: The Greffier of the States is requested to present the attached Investment Strategies to the States at the earliest opportunity.
Signature:		Position: Senator P F C Ozouf, Minister for Treasury and Resources
Date Signed:		Date of Decision:

Investment Strategies - Revised: Presentation to the States

Treasury and Resources

Ministerial Decision Report

PRESENTATION OF REVISED STATES INVESTMENT STRATEGIES

1. Purpose of Report

For the Minister for Treasury and Resources to consider proposed amendments to the existing Investment Strategies for States Funds as well as adopting some new Investment Strategies..

2. Background

Based upon a recommendation from the Treasury Advisory Panel in its advisory capacity, the Minister is requested to consider amending the existing Investment Strategies published on 22nd June 2010 (MD-TR-2010-0097 and R.C. 84/2010). In addition new Investment Strategies have been prepared for the Ecology Fund and The Lord Portsea Gift Fund.

The States Investment Strategies are presented in accordance with the terms of the Public Finances (Jersey) Law 2005 (Article 6) (the Finance Law) and Public Finances (Transitional Provisions) (no.2) Jersey Regulations 2005 (Regulation 4), which require the Minister for Treasury and Resources to present his Investment Strategies for States funds.

Proposed Investment Strategies

The reason for the change in Investment Strategies for States funds is based upon recommendations made by the Treasury Advisory Panel, in its advisory capacity. The changes were as a result of recommendations from the August 16th, 2011 meeting and the 3rd June 2011 Officers meeting.

The main changes from the current Investment Strategies are as follows:- (See Appendix A for the revised Investment Strategies)

Amendments to States Major Funds Investment Strategies:-

Strategies which previously included the Property investment asset class were amended to be a broader Alternative Investments Class (which could still include property). Further investigation is required as to which type of investments should be implemented under the Alternative Investment Class. For trust and bequest funds which previously had a 20% holding in property, these were then amended to 10% in Alternative Investment asset class and bonds increased by 10%, based upon verbal advice from the States Investment Advisor, to ensure anticipated fund returns are met.
No major strategic reviews have been carried out for the Health Insurance Fund or the Social Security (Reserve) Fund strategies as we are awaiting results of the latest actuarial reviews (Appendix A – Reference AP5 and 6).
All States funds, except JTSF and PECRS are to include revised asset ranges of +/-10% of the strategic aim asset class amount. Where an amount is shown as zero, a range of 0 to 3% has been shown. On advice from the States Investment Advisor, Alternative Investments should be excluded from these ranges as they are deemed to be ‘non stock market’ assets and therefore non-tradable and difficult to rebalance on a frequent basis.
Assets allocated for investment in the Alternative Investments Class within existing Investment Strategies are currently being held in Government Bonds, pending investment in line with advice received from the States Investment Advisor.
The Currency Notes and Coinage Investment Strategy have been revised and now include assets allocated to Alternative Investments. The Alternative Investment Class is intended to include Infrastructure Investment, in various instrument forms. This will provide improved investment returns for the fund, above current core cash returns and diversification of Investment asset classes (Appendix A – Reference AP8).

Pension Funds Investment Strategies:-

There are no changes to the strategies of PECRS or JTSF (Appendix A – Reference AP9).

Other changes to Investment Strategies:-

A paragraph has been included in the Strategy, summarising a review which was carried out in January 2011 with regard to Ethical Investment. The review resulted in no changes to our existing strategy (Appendix A – Reference AP1).
The name of the Treasury Investment Sub-Committee has been changed to the Treasury Advisory Panel. (Appendix A – Reference AP2).
Creation of new Investment Strategies for the Ecology Fund and the Lord Portsea Gift Fund (Appendix A – References AP20 & AP21). These have been designed with the intention of these Funds investing in the States of Jersey – Common Investment Fund, when this is feasible.
Reference to the Common Investment Fund - Short Term Cash Pool has been removed following the decision to close the pool.
The Common Investment Fund -Overseas equity pool was removed and replaced with 2 new Global Equity pools (Appendix A – Reference AP23).
The Long Term Government Bond Pool is currently closed due to current market conditions; however this strategy still remains in force for the pool (Appendix A – Reference AP23).

The Treasury and Resources Minister has consulted with the Minister for Social Security concerning the Investment Strategies for the Social Security (Reserve) Fund and the Health Insurance Fund.

The decision has been made based upon the Treasury and Resources Minister taking appropriate investment advice from the Treasury Advisory Panel and the States Investment Advisor.

Recommendation

For the Minister for Treasury and Resources to approve the revised Investment Strategies (Appendix A) and request the Greffier of the States to present the Investment Strategies to the States at the earliest opportunity.

Reason for Decision

The Minister’s Investments Sub-Committee and professional advisers have recommended some changes to the existing Investment Strategies.

The Treasury and Resources Minister has consulted with the Minister for Social Security concerning the Investment Strategies for the Social Security (Reserve) Fund and the Health Insurance Fund.

Article 4(1) of the Public Finances (Transitional Provisions) (No. 2) (Jersey) Regulations 2005 states:

“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.”

Article 4(2) of the Public Finances (Transitional Provisions) (No. 2) (Jersey) Regulations 2005 states:

“The Minister and the Treasurer may invest money to which this Chapter applies –

(a) to the extent and in the manner set out in the investment strategy presented to the States; but

(b) where that strategy has been reviewed, to the extent and in the manner set out in the last review of the strategy presented to the States.”

Resource Implications

Resource implications are as detailed in the Individual Investment Strategies.

Report author : Head of Investment Management	Document date : 28 October 2011
Quality Assurance / Review : Head of Decision Support	File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DSs, WRs and SDs\2011-0132 - T&R Revised Investment Strategies - LJR\WR - Presentation Revised States Investment Strategies - LJR.doc
MD sponsor : Treasurer of the States