To consider the report for information
Decision:
To accept and note
the information
Minutes:
Submitted, for information, a report highlighting the Council's actual Treasury
Management activity during the current financial year. It was highlighted that,
during the six months between 1 April and 30 September 2021, the Council’s
borrowing activity had remained within the limits originally set. There were no
defaults by banks in which the Council had deposited money. It was reiterated
that it was estimated that the Council's investment income exceeded the
expected income in the 20121/22 budget.
In the Pension Committee on 25 March 2021, it had been resolved to permit
the surplus funds of the Pension Fund to be pooled and co-invested with the
Council's overall cash-flow.
The successful vaccine rollout programme had been credit
positive for the financial services sector in general, and the subsequent
improved economic outlook had meant that some institutions had been able to
reduce provisions for bad loans. It was reported that the period had been
challenging, but with the lifting of restrictions, there had been more activity
in the second quarter of the year. It noted that Arlingclose
had extended the maximum period of some investments to 100 days.
It was explained that £10m of the Council's investments were held in
externally managed strategic pooled property and equity funds where short-term
security and liquidity were lesser considerations. Although the pooled capital value of £9.243m
was less than the initial investment of £10m, the investments were made in the
knowledge that the capital values were unstable at months, quarters and even
years; but with the confidence that the total returns over a three to five-year
period would be higher than the interest rates on cash. Consequently, the
objectives would be realised through the stability of mid-term prices.
Reference was made to the use of the Debt Management Office as an
investment vehicle that had modestly higher returns than others and that was
flexible, easy and secure to use. Although the rates were low and the outlook
was weak and unstable, it was reported that the Council was investing as much
as possible in a challenging period; it was continuing to do its best to make
gains by spreading risk, but was also operating carefully in line with Arlingclose's advice.
It was confirmed that all the treasury management activities that were held
during the period fully complied with the CIPFA code of practice as well as the
Council's Treasury Management Strategy Statement, and in the context of
investment training, officers had attended investment training with Arlingclose and CIPFA during the period that was relevant
to their posts.
It was highlighted that Arlingclose expected the
Bank Rate to increase in Q2 2022, due as much to the Bank of England's
aspiration to move out of emergency levels as to the fear of inflationary
pressures. Investors had factored in a number of increases in the Bank rate to
1% by 2024 in their valuations. Although Arlingclose
believed that the Bank rate would rise, it would not be as high as market
expectations.
The Head of Finance noted that the performance was acceptable despite the
dreadfully low interest rates.
The members expressed their thanks for the report.
During the ensuing discussion, the following observation was noted:
·
The Wales Pension
Partnership was successful – this should be celebrated
·
The Wales Pension
Partnership had added value and stability
To accept and note the information
Supporting documents: