The Greater Manchester Pension Fund – Interview


The injection of capital and institutional oversight by our investment managers are crucial to helping SMEs grow sustain- ably in our region, thus creating and pro- tecting jobs. Examples here are the Fore- sight Group, which has invested in Mowgli Street Food and Clubhouse Golf.


What’s in your investment pipeline? Our impact portfolio has several private debt and equity funds as well as some direct infrastructure, which will have a re- al positive impact on the environment. We are also looking to bring forward two key development sites in 2022: one in Chorlton worth £30m and the other a £50m project in Manchester. We have a £100m programme of impact invest- ments in 2022.


Why have you signed up to a COP26 commitment? We are a local authority pension fund and, therefore, have a wide circle of stake- holders. They have an inherent interest in this key challenge being addressed prop- erly. The Greater Manchester Pension Fund has committed to a just transition and this guides our policies across all asset classes.


I am privileged to look at an area where we can make a real positive impact, as evidenced by our pipeline. It is about changing the way we work and live going forward. It is about the built environ- ment and infrastructure working towards net zero.


What is your investment approach to ESG? ESG is a fundamental and integral part of our investments. It can mitigate risks, enhance returns and, crucially, is not a specialism separate from investment underwriting. Many aspects of our work over many years in impact investing, including hav- ing regard for the environmental and social impact of our buildings, are now becoming mainstream. We also insist that building constructors


take on local apprentices and workers. That works on the social side and lowers the carbon footprint through travelling.


How do you see the inflationary outlook developing and how will it impact your investments?


I am concerned with the potential for higher inflation than we have seen in recent years. The Greater Manchester Pension Fund monitors all risks across its portfolios and takes a long-term view. My personal view is that there is a real risk it could exceed the consensus and be bumpy in its flight path, but I cannot pre- dict the timing. Higher and more volatile inflation is a key risk. Contractual inflation linkage in pri- vate market assets, such as regulated util- ities, social infrastructure and some ele- ments of renewables, is becoming extremely expensive for investors. Whilst still providing a real yield it is arguable that there is inadequate compensation for risk underwritten in some cases. Implicit inflation linkage, such as the rent on affordable housing, has a lot more attraction from a pricing perspective, par- ticularly outside of London and the southeast.


What other headwinds are you expecting? How central banks react to inflation, and the implication of that, is a key unknown. There has been a 40-year downward trend in gilt yields and a reversal could have sig- nificant market impact.


Within real assets, given the illiquidity, and the need to build them at this inflex- ion point, the real obsolescence risk of construction new assets is something I fear in property.


When I mention Betamax risk at our investment committee, the younger members of the team look at me like I’m an alien.


What is your investment outlook for 2022? We will stick to our plans to build diversi- fied portfolios in line with our long-term strategies. I cannot and do not attempt to forecast markets over a 12-month horizon and view with extreme scepticism those who make such predictions. Like


pundits predicting horse racing


results, if they had any insight, they would profit from it rather than tell everyone. I generally try and anticipate risk and take a cautious view.


What have been the Greater Manchester Pension Fund’s greatest accomplishments?


Higher and more volatile inflation is a key risk.


The creation of GLIL and its growth is a source of enormous pride to myself and the team. In five years, it has grown from £500m and two pension fund investors to £2.5bn with a fully regulated structure. The concept has been validated by Nest selecting GLIL to be one of its infrastruc- ture partners. In terms of an individual investment, a windfarm in Clyde with GLIL, which established GLIL as a direct player in infrastructure and opened up many opportunities, has delivered outstanding returns whilst meeting all of our ESG requirements.


My colleagues would say that my biggest achievement since 2014 is not being sacked for my annoying constant remind- ers about the success of Liverpool and the difficulties of Manchester United. I point out that Old Trafford is now on its fifth manager since I joined the Greater Man- chester Pension Fund and I am hoping to make it 10.


Issue 109 | December-January 2022 | portfolio institutional | 15


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