Discussion – LGPS pooling THE PANEL
Laura Chappell, CEO Brunel Pensions Partnership
Rachel Elwell, CEO, Border to Coast
Kevin McDonald, Interim director ACCESS Support Unit
Mike Weston, CEO, LGPS Central
portfolio institutional: How have the first five years been? Laura Chappell: Busy. Our total partner- ship is £33bn and we have transitioned £21.5bn, so about 65%. For us, the proof is in the transition. We have sped through it and kept within our costs. We have invested in new assets and are getting intangible benefits from pooling. Rachel Elwell: When George Osborne said: “You shall pool,” it took years for everyone to work out how to do that. We went live in July 2018 and have since been working with our partner funds to develop the capabilities they need. It is important that the pool is set up to help the partner funds implement their strategy. Therefore, we need to be flexible to meet their needs. It takes a lot of plan- ning and a lot of talking to make sure that what is being built is what’s needed. Kevin McDonald: The chancellor’s 2015 Budget fundamentally altered how the LGPS views investment. We are either talking about assets that have been pooled or how we should ap- proach what we have yet to pool. The lens has shifted, and pooling is responsible. ACCESS’ authorities have a number com- monalities, which eased some of the deci- sions on how we would approach it. There was no legacy of internal manage- ment as the authorities employed external managers. Within the alternatives sphere there is a degree of diversity in how those funds have invested, for listed funds there was a lot of overlap. Mike Weston: We have achieved a lot, but there is still a lot more to achieve. The initial business plans that were put together in the pools’ pre-launch period were optimistic. If you look at our original plan, all the assets should have transi- tioned by now, but we are only halfway through the journey.
When you get things up and running it is more complicated than anyone had imag- ined. We need to make sure that our eight partner funds are happy and moving for-
ward at the same speed. We have FCA restrictions and requirements, which is new for our local government colleagues in the pool.
The difference between theory and prac- tice has been large, but we are making progress in asset transitions and launch- ing new funds.
It has been hard work and challenging and it will be going forward, but the end prize is still as great as ever.
PI: Have you invested in UK infrastructure as the government hoped that you would? Elwell: Infrastructure is a good invest- ment for a pension scheme, but the LGPS is not a sovereign wealth fund. It is im- portant that what we invest in meets the needs of the pension funds. We invest in infrastructure in the UK and globally. Half of the £1.5bn we invest in private markets each year is in infrastruc- ture, such as renewable energy, but it is not about solving any funding gaps that the UK government might have. Chappell: What we invest in must make sense financially for our partner funds. Brunel has a strong sustainable invest- ment stance and in UK sustainable infra- structure there are going to be more opportunities going forward. We have an allocation to infrastructure, but we look at it globally because we have to do right by our clients. Weston: Real assets, like infrastructure, are an inflation hedge and positive cash- flow generator, if you get the right assets. As schemes increasingly focus on cash generation to meet their liabilities, these assets fit into that framework. We have an infrastructure fund that should be up and running shortly. McDonald: There is a fiduciary duty to which those undertaking LGPS invest- ment decisions need to have regard, so infrastructure will not have UK exclusivity. Most of ACCESS’ activity has been in the listed space, but we have been working on how our constituent authorities can invest in illiquids in a pooled way. We want to
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