To consider a report on the above.

Members considered a report that provided a mid-year review of Treasury Management activities during the first part of 2015/16. The Treasury function aims to support the provision of all Council Services through management of the Council’s cash flow and debt and investment operations.

Members noted that interest rates have remained at historically low levels with current and expected levels of borrowing rates providing no economic opportunity to make any early repayment or borrowing.

Members were advised that the new government is likely to step up the divestment of Lloyds Bank and accordingly have re-classified the Bank as a higher risk within the counterparty policy.  The Principal Accountant explained that existing exposure in the Bank will be unwound naturally as deposits mature to comply with the associated lower investment limits

This re-classification will add significant additional pressure on the investment portfolio both in terms of available counterparties and the lower level of returns available.

In response to a request from the Audit Committee Meeting on the 15 January 2015 as part of the Treasury Management Strategy for 2015/16, Officers held a briefing session for all Members with presentations on Peer to Peer lending, Multi Asset Funds and Property Funds to evaluate to enable them to report on the impact of diversifying into new higher risk investments which could enhance the Council’s investment portfolio.

The Audit Committee gave feedback on the briefing session and considered the positive and negative risks and benefits associated with each option.

Members noted that the Aberdeen Asset Management – Multi Asset Fund was a new fund and had no performance data available, although figures are anticipated during October.  The Council’s advisors, Capita Asset Services are due to meet with Aberdeen Asset Management in October, and Members resolved to delay considering this option until advice had been received from Capita Asset Services.

The Audit Committee agreed that there should be a cap set on any investment and that there should be scope for the Section 151 Officer to test that water between now and February 2016 and report back, also for the Section 151 Officer to make a revised recommendation based on the Capita Asset Services Advice.

Members noted that feedback from the Audit Committee would be reflected in the Treasury Strategy which will then go to a Policy Development Group and then Council in October 2015 for approval.

Resolved:

(i)            That the Treasury Management decisions made during 2015/16 the first part of 2015/16 as detailed in the submitted report be noted;

(ii)          that the Prudential and Treasury Indicators as set out in Appendix 2 of the submitted report be noted; and

(iii)       that the Council be recommended to vary the Annual Investment Strategy to allow diversification of the investment portfolio into higher risk investments, initially on an experimental basis,

and approve investment in a combination of two or three of the following instruments;

·                peer to peer lending – with overall investment of £100,000; maximum individual loan amount of £1,000; maximum loan term of three years; and a maximum credit rating “B”;

·                Multi Asset Fund pending Capita advice; and

·                Property Fund.