Agenda item

The Board considered a report of the Director of Corporate Resources which provided an update on the outcome of the fit for the future consultation and pooling matters with LGPS Central. A copy of the report marked ‘Agenda Item 10’ is filed with these minutes.

The Chairman welcomed Mr. Richard Law-Deeks, Ms. Cara Forest, Ms. Jayne Atkinson, and Mr. Trevor Castledine from LGPS Central to the meeting for the agenda item who were present online. They provided a presentation as part of this item. A copy of the presentation slides is filed with these minutes.

Arising from discussion, the following points were made:

1. Currently £3.8billion of the £6.7billion LCC pension Fund was invested with LGPS Central, around 58% of the Fund.

2. The Government had focussed on the LGPS with their pension review ‘Fit for the Future’ to boost growth and investment in the UK and had looked at the Canadian and Australian models for pension funds with the aim of accelerating pooling of pension funds, and widening the services that pension pools delivered, such as, local investment. The Government had requested that a plan be drawn up for the transition to new services, and LGPS Central had received good feedback from Government on its plan.

3. LGPS Central had a range of different, diversified investment products which were updated and evolved in accordance with partner funds’ needs. When entering into partnerships with investment managers it was Central’s intention of forging long-term relationships, and there was a robust monitoring process in place following investment with regular due diligence on those managers.

4. It was explained that with a passive approach to investment, for example listed equities, there would be a benchmark of different companies and a set percentage as to how much of the benchmark would be invested in particular companies, for example, how much to invest in Tesco. The fund manager would hold the exact benchmark percentage invested and would not make any active decisions to underweight or overweight that particular stock or company.

5. In contrast with an active approach a fund manager would actually decide that they preferred one company over another and would hold a higher percentage versus the benchmark for that company.

6. In response to a question as to who set the benchmark for passive investment, it was reported that different benchmarks were used internally, typically household names such as the FTSE, that would be chosen as appropriate for a particular fund.

7. Members’ attention was drawn to the global multi-asset credit fund, and that the current underlying makeup of the fund was currently under review. Whilst figures in the report showed that performance was lower than the benchmark, the fund had performed well in Q2. It was further noted that long-term investments should be looked at with a 10-year plus lens as early investment had one-off costs at the start which depressed return, and it would take time before real returns were seen. Progress in relation to the review would be reported to the Committee at a future meeting.

8. It was suggested that Government were taking a harder line and a more legislative approach to promoting pooling. LGPS Central as a company and with partner funds had put together a forward plan which would address some of the important needs and new requirements the government had imposed on pooling companies. However, it was clear that each individual administering authority would remain sovereign over their high-level investment strategy, but rather than obtaining principal advice from a third-party advisor would now need to take that advice from their pooling company, and an advisory function would need to be built.

RESOLVED:

That the LGPS Central update report and presentation be noted.