Border to Coast – Interview
improve standards, as opposed to divest- ing, which is passing the problem to someone else. So, being an active voice on that front.
It is not every day that you get to build a £55bn asset manager from scratch, with long-dated capital and long-dated liabilities. Most of the UK’s pension industry is de- risking, so cannot do interesting things. We have inflation-linked liabilities, open plans and long-dated liabilities, so we should be managed differently and be more focused on return-seeking assets to minimise the cost of funding. This is the third start-up asset manage- ment company I have been involved in but is by far the most complex in terms of the scale, timeframe and the amount of stakeholders – 11 partner funds. So, we have to bring the councils, politicians, advisers and consultants along with us while we are building something.
What are your key objectives?
To make Border to Coast compete with the Canadians and some of the other more sophisticated international plans. I also want to improve the risk-adjusted performance over time. How do I do that? One, risk-balanced portfolios, to make sure we are not overly concentrated to any one outcome but can perform reasonably well in different envi- ronments and scenarios. Two, give access to the right funds and strategies. Three, to do this all on competitive terms. Another is building a sustainable organi- zation and having a strong team around me, so it is not reliant on one key person and that there are multiple leaders in the team.
Then there is making sure we are inte- grating ESG and the climate transition into the investment process in a sensible manner. We want to be engaging and
What does your current investment portfo- lio look like? We have about £25bn of active equity and fixed income on the platform. About half of that is internally managed with the rest through funds. That is a legacy preference some of our partner funds have: some prefer internal and some external, but we are also thinking about where it is appro- priate to do internal management versus external management. For example, our investment grade credit portfolio is managed externally with com- petitive costs from the market. I could have built that slightly cheaper internally, but the risk of building a top quartile internal team for the cost savings was not an attractive trade off. So we went for a marginally more expensive option, which helped get it up and running quickly and select the best-in-class managers. We have about 10 funds at the minute – all fundamentally active strategies. As I men- tioned, we have three alternative sleeves, with £5.7bn in assets, of which about 40% is allocated to infrastructure with around 30% each to private credit and pri- vate equity. We are launching a couple of funds: mul- ti-asset credit and listed alternatives, which will take another £5bn to £6bn active exposure into the pool over the next quarter.
And we are in the process of working through the real estate investment trust (REIT) transition [amendments to the UK REIT rules] and how that works, and we will eventually be one of the biggest hold- ers of UK real estate.
What do you find attractive in the invest- ment markets?
It is more a case of what is not attractive: and what is not attractive is cash. You are going to get a negative real return holding
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