Interview – Lothian Pension Fund
INTERVIEW – DOUG HERON
“We are entering unchartered territory in terms of how an economy recovers after a pandemic.”
Lothian Pension Fund chief executive Doug Heron tells Mona Dohle about managing a 100-year investment horizon, not changing for Covid, the benefits of collaboration and life after the pandemic.
How has lockdown been for you? I am reasonably upbeat about it. We are in interesting times but for a man that cuts his own hair I am in fine spirits. I am incredibly proud of the work that my team has done over the past four months to keep us all on the road to do what we are here to do, which is to pay pensions to members.
Has working from home been a difficult transition for your team?
In terms of the technological set-up, we probably just had a foothold. We had lap- tops and a business continuity arrange- ment, but I saw a remarkable ability to adapt. Thanks to our technology partners we were fully equipped and everybody was working within 24 hours.
16 | portfolio institutional August 2020 | issue 95
You are an accountant by trade, so how does that affect your perspective on Lothi- an’s investment strategy? I sometimes describe myself as “a former accountant” or “reformed accountant”, but you never leave these things behind. I am still a member of the accountancy profession.
My background in finance and account- ancy stands me in good stead to do the role I do today. Ultimately, when you are making investments you are taking a good look at a company’s prospects and a financial mindset helps you to do that. I have been in roles where I had to make sure that dividends could be sustained, so I am good at looking at how resilient a company’s income streams might be. My accountancy background also helps
with systems and controls. We pay around £700m a year in pension benefits, that requires a system of controls, checks, bal- ances and segregation of duties, all core skills for an accountant.
Why do you manage most of Lothian’s assets in-house? We have an allocation of equities, which accounts for around 65% of the strategic allocation in our main portfolio. Some might think that’s high, but we are a local government pension scheme, we are defined benefit and we are still open to new members. The life of our scheme is effectively the lifetime of the dependants of our youngest members, so it is in the range of about a hundred years. We have a set of investment beliefs and
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