URL: https://meetings.cotswold.gov.uk/ieDecisionDetails.aspx?ID=523

Decision Maker: Audit and Governance Committee, Council

Outcome: Recommendations Approved

Is Key Decision?: No

Is Callable In?: No

Purpose:

Content: The purpose of the report was to allow Members to receive and discuss details of the Council's Treasury Management performance for the period 01 April to 30 September 2025..   Cabinet Member for Finance, Councillor Patrick Coleman, introduced the Treasury Management report for the first six months of the financial year. It was noted that the report showed a broadly positive position, although future financial uncertainty remained.   Members were advised that the statutory override for externally managed pooled investments had been extended for a further four years beyond 31 March, which was beneficial given the Council’s investment holdings of £10.5m in strategic pooled funds, primarily held for income generation. Some capital growth had been achieved during the period, and overall trends were reported as positive.   The presence of the Deputy Chief Executive Officer was noted for the purpose of responding to technical questions.   The Chair thanked Councillor Coleman and invited questions for clarification.   Clarification was sought regarding the Council’s pooled fund investments with reference to recent volatility in global stock markets. Questions were asked as to what extent the Council actively managed its pooled funds and whether the Council relied on external consultants to rebalance or switch investments in response to market movements, or whether management of the funds was undertaken on a more passive, “light-touch” basis.   Councillor Patrick Coleman noted that the question was helpful in improving members’ understanding of financial markets. He observed that there was a distinction between stock market movements and pooled fund performance and suggested that the relationship between these investment types would be best explained by the Deputy Chief Executive Officer.   The Deputy Chief Executive Officer, explained that the Council’s pooled fund investments were detailed in Table 5 on page 49 of the public report and advised that these investments were held for the long term, typically over a five-to ten-year period, and that the decision to invest in specific funds had been made by Council some years previously. Any change to those investments would require a further Council decision.   Members were cautioned that past performance was not a reliable indicator of future performance and it was highlighted that there were costs associated with changing investments and changes should not be undertaken lightly. He noted that the initial investment of £12.5 million had reduced in value to £11.686 million as of 30 September 2025, and that selling and reinvesting would crystallise that capital loss.   It was further clarified that the Council undertook regular reviews, with support from its advisers, to ensure the investment portfolio remained diversified across different asset classes, including property funds, income-maximising funds, and multi-asset funds. This approach reduced exposure to any single market or fund. He advised members to note current performance and confirmed that the Audit and Governance Committee could provide further assurance regarding the robustness of the investments.   It was noted that the Council’s Treasury Management Risk Reserve had been established approximately 18 months earlier to manage the risk associated with the statutory override relating to pooled fund valuation losses. This  statutory override allowed the Council to disregard unrealised losses at a specific point in time. Without the override, the Council would have been required to account for such losses. It was confirmed that the reserve was reviewed regularly and was being used to mitigate future pressures, particularly in light of reduced investment income anticipated as internal resources were used to fund capital investment, including the waste fleet replacement programme, in the period leading up to local government reorganisation.   Concerns were raised about the Council’s investment in Fundamentum Housing REIT. It was noted that a similar social housing investment fund had collapsed.  Members questioned whether the Council’s investment was secure.   The Deputy Chief Executive Officer  advised that a written response would be provided to members. It was confirmed that the investment had been made relatively recently and that the Council received ongoing advice from its investment advisers, who would flag any concerns. Assurances were given that any significant risks would have been identified.   Referring to figures in Table 5, members noted significant variation between the performance figures of the various funds. It was suggested that it would be helpful for members to receive comparative sector benchmarks to assess whether individual funds were performing above or below average.   Prior to the response being given, Councillor Mike Evemy declared an interest in one of the funds in the table, explaining that he was appointed to the board of the Municipal Investment Trust, which held a share in CCLA, one of the investment managers referenced. He confirmed that the role was unremunerated and that he held no personal financial interest. The Chair sought and received clarification on this point.   The Deputy Chief Executive Officer confirmed that he would provide members with a detailed breakdown of the long-term performance of the cautious multi-asset income fund, noting that short-term performance figures could be misleading when viewed in isolation.   Members sought clarification as to how the Council’s values, including ethical and environmental considerations, were reflected in its investment decisions.   In response, the Deputy Chief Executive Officer confirmed that ethical investment considerations had been raised previously and that the Council’s advisers had provided a detailed assessment of the ethical characteristics of the pooled funds approximately 18 months earlier. It was noted that there was no single definition of ethical investment, but that the assessment had considered matters such as climate priorities and sector exposure. There was an undertaking to circulate the information to members again.   Councillor Nigel Robbins spoke in support of the recommendations and added that questions of this nature frequently arose among local authorities with investments in pooled funds, and that such authorities continued to invest where appropriate assurance was provided. The Member commented on the statutory override, observing that it reflected a lack of understanding by central government of local authority investment practices.   Councillor Robbins noted that the Council’s investment position compared favourably with other authorities within the adviser’s portfolio. It was acknowledged that while higher returns could be pursued, the Council had adopted a balanced approach between risk and return. The advantage of the  Council’s strong cash reserves was highlighted, which reduced the need for external borrowing and associated interest costs.   It was further noted that the report had already been considered by the Audit and Governance Committee and Members were encouraged to vote in favour.       Councillor Coleman summed up and noted that the Council’s investment performance was generally mid-table, with most councils achieving between 3.5% and 4.5%, and expressed appreciation for the forthcoming written answers and for the support provided.   The Chair moved to the vote on the resolution proposed by Councillor Coleman and seconded by Councillor Robbins.   Voting record: 31 For, 0 Against, 0 Abstentions.

Date of Decision: January 21, 2026