School Teachers' Superannuation Fund.

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A decision made (09/02/2009) regarding: School Teachers' Superannuation Fund.

Decision Reference: MD-TR-2009-0022
Decision Summary Title:	School Teachers’ Superannuation Fund		Date of Decision Summary:	6th February, 2009
Decision Summary Author:	Maria Washington		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title:	States of Jersey Teachers’ Superannuation Fund – Equity Benchmark changes		Date of Written Report:	6th February, 2009
Written Report Author:	Maria Washington Corporate Financial Services		Written Report : Public or Exempt?	Public
Subject: Ministerial approval required to change equity split for the School Teachers Superannuation Fund
Decision(s): The Minister approved changes to the equity benchmarks for Bailie Gifford as requested by the Teachers’ Superannuation Fund’s Management Board.
Reason(s) for Decision: The Minister for Treasury and Resources is required, under the terms of a States Order to agree investment strategy for each investment manager of the Teachers’ Superannuation Fund.
Resource Implications: None.
Action required: Teachers’ Superannuation Fund Management Board to be notified of the Minister’s decision.
Signature:		Position: Senator PFC Ozouf, Minister for Treasury and Resources
Date Signed: 9th February 2009		Date of Decision: 9th February 2009

School Teachers' Superannuation Fund.

TREASURY & Resources ITEM NO:

TREASURY AND RESOURCES MINISTER

Report re States of jersey Teachers superannuation Fund – equity benchmark changes

Purpose of Report

This report asks the Minister to approve changes to the Teachers’ Superannuation Fund’s active equity manager’s (Bailie Gifford) equity benchmark.

Background

A States Order issued under the School Teachers’ Superannuation Fund Law states “The Management Board shall agree with each investment manager an investment strategy which has been approved by the Minister for Treasury and Resources”.

2.2 The previous Treasury and Resources Minister had agreed that the School Teachers’ Pension Fund should be invested as follows:-

Asset Allocation and permitted deviation range before rebalancing

	Asset Allocation %	Strategic Range
UK Equities	42.1	39.6 – 44.6
Overseas Equities	42.1	39.6 – 44.6
Conventional Bonds	5.3	4.8 – 5.8
Index Linked Bonds	10.5	9.5 – 11.5

Note: Excludes £7million property

Attached as Appendix A is a report prepared by David Hager from Hewitt Associates Limited on the proposed change. David Hager is the Investment Adviser to the Teachers’ Superannuation Fund and also the States Investment Adviser. The changes have been approved by the Fund’s Management Board on 17th December, 2008.
David Hager has confirmed that there is no conflict of interest between his role as adviser to the Teachers’ Fund and as the States Investment Adviser.
The Fund’s Management Board wishes to make changes to the benchmark for equities with the aim of continuing the performance record so as to:

Recognise the increased globalisation of markets;
Reduce the dependence on UK securities where the largest ten companies dominate the market;
Give the active investment manager more flexibility in security selection.

2.6 As indicated in the attached Appendix A the changes approved by the Management Board do not involve any change to the overall investment strategy.

2.7 At present the benchmark for the active equity manager Bailie Gifford is:

UK Equities 50.0%

North American Equities 15.7%

European Equities 15.7%

Pacific Basin (inc Japan) Equities 15.6%

Emerging Markets 3.0%

It is proposed that the benchmark becomes:-

UK Equities 30%

Global Equities (inc Emerging Mkts) 70%

Comments

The advice received from David Hager, in his role of Investment Adviser to the States of Jersey, is supportive of the change. In summary he states:-
1. There is no change to the overarching strategy of the fund (i.e. the percentage in risk reducing and return seeking assets remains unchanged);
2. The proposal improves the efficiency of the active manager arrangements and more closely recognises the more global basis of investment;
3. The proposal reduces the risk of having too much invested purely in UK equities.

Recommendation

That the change requested by the Teachers’ Superannuation Fund Management Board is approved by the Minister.

Reason for Decision
- To enable the equity benchmark for the Teachers’ Superannuation Fund for equity manager’s, Bailie Gifford to be amended to recognise the increased globalisation of markets, reduce the dependence on UK markets and give the manager greater flexibility in security selection.

States Treasury Corporate Finance

26 February, 2009 for decision 9th February, 2009

c:\documents and settings\washingtonm\local settings\temporary internet files\olk52\wr - teachers superannuation fund investment changes mlw.doc printed on 26/02/09 at 03:02 PM