Interview – West Yorkshire Pension Fund
team and will drive much of the agenda, and under the scheme of delegation it is the director’s responsibility to manage the fund. We are going to be doing a gov- ernance review in the next few months and how this operates and whether any improvements can be made will be looked at, but Leandros and I are already working closely together. The LGPS Scheme Advisory Board has been working on the Good Governance review and has handed it to the govern- ment who are launching a consultation. I suspect we already meet most of the rec- ommendations, but the two of us coming in could be an opportunity to see how things can be tweaked.
How is the relationship with Northern LGPS? Miller: Good, I think. My role at Greater Manchester was assistant
director
a pool. The concept of a pool wasn’t really defined in the 2015 guidance, which is one of the difficulties.
It can work with pools interacting and col- laborating. To invest with one pool you don’t necessarily have to come out of another. GLIL spans two pools. It also has Nest as an outside investor.
Is pooling an effective system? Miller: Pooling has made people think seriously about collaboration. It has made people ask: is the route into that invest- ment the most efficient way of doing it? If not, how can we make it more efficient. Even if the government doesn’t succeed in getting more assets into pools, it has at least made funds look at what they are doing. There is a tangible benefit to that even if it is difficult to quantify.
for
funding and business development. The first part of this was an almost in-house funding actuary employers.
role, talking to the
On the business development side, I was interacting with other LGPS funds and related parties in the pensions industry, like the PLSA. I know a lot people in the LGPS through that role, which has been helpful.
How is the pooling process going in light of Kensington and Chelsea wanting to exit? Miller: The government has been talking for some time about releasing a consulta- tion on the next steps in pooling. I don’t know how far that has progressed or if it needs to be rewritten or tweaked to reflect the developments at Kensington and Chelsea. If and when it comes out, we will have to see what guidance it has on funds leaving pools.
There is a grey area in that you need to be part of a pool but do not have to pool any of your assets, which seems bizarre. Miller: The guidance suggests the majority of your assets should be invested through
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Could the Kensington and Chelsea situa- tion result in a two-tier system, where some schemes are in a pool and others are not? Miller: We are a large fund. Greater Man- chester and Merseyside are also large funds. How we do things and the best way for our funds to invest is going to be dif- ferent to smaller funds. We have always been sceptical about a one-size-fits-all approach to the LGPS for this reason. It is the fiduciary duty of the fund and committee members to do what is best for their fund. What one London borough thinks is best for their fund might well be different to what we think is best for our fund.
Are you committed to your pool? Miller: Yes. In the Northern LGPS we have always been efficient in the listed-asset space. We are big funds and have a lot of internal resource.
Alternatives is where we thought cost sav- ings could be achieved. That was where our early concentration was, creating GLIL with Local Pensions Partnership and the collective private equity vehicle we have. They were the obvious cost sav- ings for Northern LGPS.
You mentioned GLIL. The government wants to get more pension funds involved in infrastructure. Is there is a gap between the rhetoric and reality of the situation? Kalisperas: Supply is always going to be an issue in infrastructure, as it is in many private markets, so I would not exception- alise infrastructure. Being large, we have already moved into that space.
Are you looking at your wider asset alloca- tions given that we are moving from the great moderation phase to a ‘new normal’? Kalisperas: I start from the position of humility. The pension fund has had a focused, relatively simple asset allocation that has served it well. Can we think about things differently, as you say towards a ‘new normal’? I would broadly categorise that question simplistically as do 60/40 or 80/20 port- folios need to look more at themes or regimes and effectively consider the allo- cation in that context? Perhaps. But you have to go with the tempo, the culture, the resources and spirit of the enterprise. And the spirit of this enter- prise is that it is open, it has a long hori- zon and has done well.
I come from a social science background so I am culturally attuned to the fact you can make things too complex in the investment space. But we have to think about whether an inflationary risk premium is back in the market after a 40-year absence. It has to be considered given that our liabilities are inflation linked.
Will that have a big bearing on any adjust- ments you make? Kalisperas: It will. We are an unlevered pension fund and will remain so. Our choices will be somewhat constrained. We already have inflation-linked income streams in bonds, in parts of property, infrastructure and elsewhere. But do we necessarily classify those things effectively? To move needles, you need to know where
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