Alternative Treasury Management Investment Option
The Director (Corporate Services) informed Members of the findings of initial investigations into alternative treasury management investment options, in particular the use of Diversified Income Funds. The report presented a proposal to progress the use of Diversified Income Funds as an alternative investment option for the council, subject to further due diligence work by officers.
The Director (Corporate Services) apologised for the lateness of the report being released but informed the committee that the Chair, Vice-Chair and Cllr John Burden had been briefed on the matter ahead of the meeting.
The Director (Corporate Services) outlined the following key points:
- On 27 June 2017, Full Council agreed to the Property Acquisition Scheme being extended by recommendation of the Finance & Audit Committee and a further £10m from the investment balances was made available to the scheme
- Since securing the money it has become clear that the commercial property market is in a very different position than it was twelve months ago; there have been fewer properties put up for sale and those that have been are more fiercely bid upon by other parties.
- Three potential acquisitions are being pursued at this moment in time; no bids have been made and none have been considered by the Property Acquisition sub group yet
- Whilst the council is waiting to make these acquisitions, the funds can be invested into more fluid investments types which will achieve a higher return than traditional investments with banks and building societies and allow for increased manoeuvrability of the funds
The Principal Accountant (HRA & Exchequer) advised that GBC are now looking at diversified income funds run by external fund managers which start off with traditional investments in property and equity but also branch out to more unusual assets such as toll roads, surgeries, student accommodation etc. The range of assets provides a wide spread of risk and more liquid funds which means GBC can disinvest in a shorter period of time. The council’s cashflow model has been updated which indicates that the council’s cashflow position will permit placing funds in these alternative investment vehicles in the short to medium term.
The council will be engaging with its treasury advisors, Capita Asset Services, to seek their advice on potential investment opportunities.
It was proffered by a Member that he supported the proposal but there shouldn’t be a restriction against particular investments funds; there are high returns on areas such as military and tobacco investment and GBC should not be overly concerned with who their investments also invest their money in. However other Members of the Committee felt that any unethical investment should be avoided by the Council and if found out to be later on in an investment, GBC should pull out immediately.
The Director (Corporate Services) advised that he would pass the information along to the sub-group to ensure that possible investments are investigated thoroughly to see how they would invest GBC’s money and cited that at this time GBC are approaching £2 million income per annum from investments.
Resolved that Members:
- Endorse the work to investigate alternative investment options and support further due diligence by officers on Diversified Income Funds
- Recommend to Full Council that the Treasury Management Strategy Statement (TMSS) for 2017-18 is amended to include the use of Diversified Income Funds in the list of non-specified investments at Appendix 1 of the TMSS
- Recommend to Full Council that once the Director (Corporate Services) is satisfied that due diligence on Fund suitability has been undertaken, £10 million of treasury balances are placed in Diversified Income Funds, with a maximum of £5 million placed into each Fund at the time of deposit
- Recommend to Full Council that the Diversified Income Fund governance arrangements mirror those for Property Funds, in that the use of Diversified Income Funds be considered by the Property Acquisitions Cross Party Working Group, enabling Members to be actively involved in the selection process and provide advice to officers.
- Report to Finance and Audit Committee V3, item 26. PDF 86 KB
- Cashflow August 2017 - Appendix 2, item 26. PDF 181 KB