Local Pensions Partnership Investments – Interview


favour, as long as you can stomach some illiquidity, which we can.


You are focused on return seeking assets: how does this influence your investment approach? I am, in my background, someone who very much manages and drives portfolio outcomes. On investment decision mak- ing, the reality is that you need to have a clear view of the long term. Looking be- yond short-term bugs in the road is great from our point of view.


It also means that the framework we use to implement the portfolios, while we are risk aware, we are also pretty risk seeking as well. It means we can take that long- term perspective which is our major com- petitive advantage relative to other market participants. It does mean you have to be confident in the process oversight and thoughtful about how you build the portfolio.


What changes have you made to LPPI’s in- vestments during your tenure? We are not particularly high velocity in how we move the portfolio. The themes I am pressing on are a focus on fees, mak- ing sure we get value for money and hold- ing managers to account. Another issue I


am pushing the team on, is to think more holistically about the portfolio. Our clients want a top-down allocation and the investment teams are finding assets that fit within the mandate. What I am pressing to drive home more is that top-down piece, and how we look at the portfolio holistically: thinking about the role more precisely of each asset group and making sure that we find the most efficient way of expressing an exposure within the portfolio.


Your remit is to reduce pension deficits and improve investment returns, which has borne fruit with around £47m of savings for your clients since inception, while not foregoing returns. How did you achieve this? We run two blocks of capital in-house: one, our global equity fund, half of which is managed internally, while in the exter- nal part we drive the fees down. The other is core infrastructure, – the assets of which are stable and long term. The second element is using our scale to efficiently implement and have relation- ships with managers where we can nego- tiate the basis points we pay.


To me, global equities is the ultimate strategic asset class.


How do you see the economic picture shaping up in the next 12 months and how will it impact your investment approach? We are pretty long term and do not try to be too opportunistic. We do not take big directional calls. Looking at the next year, I heard a quote from Lee Cooperman, chief executive of US-based Omega Advi- sors, who said: “I am a fully invested bear,” which is a great way of framing it. It is hard to see, aside from if the vaccines do not work, things not getting better. We see an acceleration in economic activity. At the moment it is hard not to have opti- mism. We are not aggressively investing at this point of time. The area I do see us having more is in the credit sphere. If things do dislocate, we have more capital to employ to make of those opportunities.


Are you concerned with a taper tantrum or a rise in inflation?


If you are trading in fixed income and get on the wrong side of that – that is a big deal. For us, what can disrupt our portfo- lios are the bigger risks: the value of real estate, the value of infrastructure, the value of long-dated growth equities. If long-term interest rates rise the value of those assets could be hit. That is the risk we see.


What investment objectives do you have going forward and how will that shape your investment philosophy?


This is a continuation of the industrialisa- tion of what we do: building in more pro- cess, building in more analytics, systems and data and the ability to do that better. The big game changer is net zero, ESG and responsible investing. We are, like everybody else, deeply embedded in net zero and see that being pulled into the core portfolio manage- ment process. It is already there, but it is changing how we communicate with cli- ents. And getting that better view of the portfolio holistically – making it coherent. We have also updated our investment beliefs recently with more explicit ESG and responsible investing components. It is now integral to how we think about our investment process.


On what criteria would you like to be assessed as a CIO?


That I have stewarded the team well through my tenure and that we are improving, whether it is culture, systems, process and capabilities.


I have created a team plan, measured what mattered and put that to the team with objectives and results. It helps us focus.


The idea is that we build a tier one asset owner-asset manager organisation. So, our investment team is viewed as a pro- fessional, credible, solid team who can be relied upon and held in high regard.


Issue 104 | June 2021 | portfolio institutional | 15


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