The Head of Community Development presented the report to the Group. Kent County Council (KCC) had invited Sevenoaks District Council to take part in the Kent & Medway Investment Fund, which they presented as a chance to combine investment and regeneration. The next development phase of the Kent & Medway Investment Fund would set the investment strategy and objectives for the Fund. This phase would involve a commitment of £25,000.  Following this stage, if the Council decided to join the fund, a ten year investment of £2 million would be required in either cash or property.

The Group was informed that if they chose to enter the scheme at a later stage then there would likely be financial penalties for taking less risk. The Council would also have less input into the setting of objectives and this could decrease chances of the regeneration involving areas within the Sevenoaks district. Membership of the Fund provided no guarantees that local projects would be helped. A Fund Manager would ensure that the best investment return was secured, which may not benefit regeneration projects.

Some Members were concerned whether it would be beyond the Council’s powers to make this investment. The Chairman was concerned whether KCC’s proposal to make an investment from the Pension Fund amounted to a Council investing in itself. He had written to the KCC Head of Financial Services but had not received a response. The Head of Community Development said that, if Members were interested in investigating the scheme further, legal advice would have to be taken.

Officers confirmed that any assets contributed would no longer be considered Council assets but would be replaced with a share of investment in the Fund. It was unlikely any property could be bought back and, if it were, it would have to be at the market value at the time.

A Member noted that Officers had not been looking for investments similar to this. It would involve moving £2 million of assets from a 6 month to 10 year investment and from a low to medium or high risk one. In response to Members’ queries, Officers confirmed the money would have to come from the general fund reserve and that it ran counter to the Council’s current investment strategy, which aimed to be low risk. A Member added that the general fund reserve balance had already been set as low as most Councillors were happy for it to be.

Several Members believed it to be a seriously misguided investment opportunity and very high risk. They believed the premise of combining investment and regeneration to be flawed because of the contradictory aims.

A Member suggested that the proposal could have some benefits. The KCC pension fund had a history of investing in Kent and there had been other examples of regeneration being very effective. However it was still unclear what regeneration would entail in this case. He was also concerned that the Council would not have the leadership of the Fund.

It was suggested the 10% to 12% returns from the fund would be exceptionally difficult to achieve. The management cost was also higher than average as the £500,000 annual fee amounted to a 2% charge when the average was currently 1%. The fund would also attract stamp duty and corporation tax.

It was agreed that capital preservation should was the top priority and as a result the Group would not recommend investment in this Fund.

Resolved:      That. Members’ views be forwarded to Cabinet for consideration.

At 10:57 a.m. the Chairman adjourned the meeting for the convenience of Members and Officers. The meeting resumed at 11:03 a.m..