Long Term Care Fund (LTCF): New Investment Strategy

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A decision made 28 July 2016:

Decision reference: MD-S-2016-0049
Decision Summary Title:	Funding of Long Term Care Fund New Investment Strategy		Date of Decision Summary:	26 July 2016
Decision Summary Author:	Finance Manager Social Security		Decision Summary:	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title:	Funding of Long Term Care Fund New Investment Strategy		Date of Written Report:	26 July 2016
Written Report	Finance Manager Social Security		Written Report	Public
Subject: Funding of the new Long Term Care Fund (LTCF) Strategy.
Decision(s): Under Article 11(2) of the Long Term Care (Jersey) Law 2012 the Minister agreed funding of the Long Term Care Fund (LTCF) Investment Strategy by way of transferring £10m into the Common Investment Fund (CIF) for onward investment.
Reason(s) for Decision: The Minister for Treasury and Resources has published an investment strategy for all funds participating in the Common Investment Fund including the LTCF, under Public Finances (Transitional Provisions) (No. 2) (Jersey) Regulations 2005, (paragraph 5) the Treasurer may invest money to the extent and in the manner set out in the investment strategy. The investment strategy of the LTCF is to hold 50% of the Funds investment assets in cash and 50% of the assets in Absolute Return Bonds. The transfers are therefore in line with the investment strategy of the Fund, which is designed to deliver the best returns whilst preserving the required liquidity of the fund. £10 million is the amount assessed by the department to be available for investment at this time after allowing for the operational needs of the Fund.
Resource Implications: The value of the LTCF will remain unchanged but its cash holdings will be reduced and its holdings of Absolute Return Bonds will increase. No further implications.
Action required: Business Manager to advise Finance Manager that this decision has been approved.
Signature:		Position: Minister
Date Signed:		Date of Decision:

Long Term Care Fund (LTCF): New Investment Strategy

Social Security Department

Ministerial Decision Report

Funding of Long Term Care Fund New Investment Strategy

Purpose of Report

To enable the Minister to agree funding of the Long Term Care Fund (LTCF) Strategy by way of transferring £10m into the Common Investment Fund (CIF) for onward investment.

Background

The LTCF maintains an operational working cash balance and at present the fund has a net cash surplus. A review of the expected cash flows of the fund has concluded that a proportion of the cash balance will not be required during the current MTFP period, retaining a buffer to meet operational needs. This balance can be invested in the CIF to generate greater returns than a cash holding.

Following a meeting in June 2016 the Treasury Advisory Panel (TAP) recommended the adoption of an updated investment strategy for the LTCF. The investment strategy of the LTCF is to hold 50% of the Funds investment assets in cash and 50% in absolute return bonds.

The working cash balance of the Fund will be kept under review to establish whether further transfers are possible or if funds need to be transferred back.

Recommendation

Under Article 11(2) of the Long Term Care (Jersey) Law 2012, the Minister is recommended to approve the transfer of £10m, allocated to the investment portfolio of the LTCF, and the transfer of 50% into the Absolute Return Bond Pool and 50% into Long Term Cash Pool within the CIF.

Reason for Decision

The Minister for Treasury and Resources has published an investment strategy for all funds participating in the Common Investment Fund including the LTCF, under Public Finances (Transitional Provisions) (No. 2) (Jersey) Regulations 2005, (paragraph 5) the Treasurer may invest money to the extent and in the manner set out in the investment strategy.

The investment strategy of the LTCF is to hold 50% of the Funds investment assets in cash and 50% of the assets in Absolute Return Bonds. The transfers are therefore in line with the investment strategy of the Fund, which is designed to deliver the best returns whilst preserving the required liquidity of the fund.

£10 million is the amount assessed by the department to be available for investment at this time after allowing for the operational needs of the Fund.

Resource Implications

The value of the LTCF will remain unchanged but its cash holdings will be reduced and its holdings of Absolute Return Bonds will increase. No further implications.

Report author : Finance Manager Social Security	Document date: 26 July 2016
Quality Assurance / Review : Finance Director Social Security	File name and path: L:\3 Political and Executive\B Soc Sec Ministers\B304 Ministerial Decisions\2016\0049 - Transfer of LTC Funds into CIF
MD sponsor : Finance Director Social Security