Discussion – LGPS pooling
planned to do. There was no assumption that Covid would cause a delay. We launched a corporate bond fund, selected managers for emerging market debt and multi-asset credit. That activity is going ahead, we are just doing it in a different way.
PI: You follow different investment ap- proaches. Could there be pressure from government to adopt an industry-wide standard? Elwell: Central government has been good at setting principles but respect that the pools need to do what is right for their partner funds.
There are five operating models across eight pools. Those have evolved because they were the right way to deliver for the partner funds. When the partner funds elected which pool to join, they did that in cognisance of what they wanted to build. I do not see pressure from central govern- ment to change that. But over the next 15 years, who knows what could happen. There could be change but I do not see pressure in the short to medium term. McDonald: With 89 local authorities at the time of the 2015 announcement, it is not a surprise that when the pools developed that there were different approaches. We have eight pools which are at different stages of progression and so it is too early to make like-for-like comparisons. If you cannot do that then drawing conclusions about one approach over another is premature.
We do not have enough evidence to make hard and fast conclusions about Model A and Model B, and we will not be able to have proper comparisons for some time. Weston: It is dangerous for the govern- ment to tell funds where to invest. Our understanding is, that following a Supreme Court judgement, the next step is for regulation to replace guidance. That regulation is not going to tell us where to invest, it is more likely to focus on if we should be FCA regulated.
There will be changes going forward, that is inevitable. What they are, we do not know but we will react and fall back on those principles of having to deliver investment performance for our clients. Chappell: There will be a natural evolu- tion over time of what models and approaches work. It is not going to be dic- tated by anyone.
I would be worried by a government try- ing to dictate an investment approach. Most of us set up as FCA-regulated fund managers to make sure that we are com- petent to do the job.
PI: Finally, what challenges do you expect in the next five years? Weston: The first thing is to get through Covid and whatever it throws at us. The challenge then is maintaining the mo- mentum that was established in the first couple of years when we were transition- ing large amounts of assets into the pub- lic market asset classes. We then need to manage the challenge of
moving into the business-as-usual phase. The focus moves from creating new stuff to making sure we are efficiently manag- ing what we have and adapting to the changes that will come along. Ultimately, the challenge for any asset manager is delivering the investment per- formance that our clients expect. Elwell: It is not just about getting through Covid but making sure that the culture work that we have been doing in my team and with the partner funds is stronger coming through this. From a leadership perspective, that is my single biggest challenge.
The LGPS has come a huge way over the past five years. What does the next five years bring and how much change is needed is something that we will discover together, I hope. McDonald: Building on solid foundations. It feels as though we are generally half- way there. Chappell: In the next six months we need to launch our fixed income funds and then we are, more or less, done. We are already turning our attention to the future and what that looks like. We are thinking about how to innovate in this environment. We are looking to move the portfolios towards that net zero journey. We have the bedrock almost done and then it is about planning into the new world that we are going to be living in because the pace is fast. There is not going to be any let up. If anything, it speeds up a bit.
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