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Mike O’Donnell | Interview


clients have significant commitments to do more in these areas and are doing the thinking right here, right now in terms of what that means for their investment strategy.


They are at a point in the cycle where they are all doing their triennial valuations and that is usually a prompt for re-thinking their asset allocation strategy. When we get to the back-end of this calendar year, we will be having some more concrete conver- sations with LLAs about what those emerg- ing investing requirements look like in terms of ESG, but also more generally.


Are ESG and sustainability quite big topics for London CIV? Yes, and that is the case for all pension funds these days, not just for local govern- ment pension


schemes. Private sector


funds are, quite rightly, being encouraged to think about climate change risk and ESG more broadly. These are things that poten- tially should drive investment decisions.


What do you look for when picking fund managers? We have a fairly rigorous fund manager selection process. We look at the available universe, we will look at who is out there. We look at the performance track record, although we know that past performance is


part of their investment consid- erations and process, whether that is through engagement or stock selection. It should be a consideration as part of every- body’s investment strategy.


Any plans to invest directly in London? No immediate plans. We are, as I said, looking to launch an infrastructure


fund


London Collective Investment Vehicle (London CIV)


Chair: Lord Bob Kerslake Chief executive: Mike O’Donnell Chief investment officer: Mark Thompson


shortly.


Member funds: London’s 32 local borough councils Member fund assets: £36bn


That could well come with some London investments, but it is not a London-focused fund. From the conversations we have had with the LLAs, there is significant interest in investment in hous- ing within London. So, we will want to respond to any demand for that, but the challenge of those sorts of things is concen- tration of risk and investment returns. The bottom line on all of our investments is that they are there to generate return and to help fund the pensions liabilities of the local government pension schemes across the LLAs.


Your proposed infrastructure fund was on hold for a while, so what stage are you at with it now?


It is progressing well. We expect to submit it


to We are all doing


something that is quite new and innovative.


no guarantee of future results, so we don’t place too much store by that. Essentially, we are looking for consistency, a sound investment philosophy and the strength of the team. A team that not only has a track record in delivering but a philos- ophy and a strategy for doing that, which can be replicated, is what we look for.


Does ESG feature in the process? We expect all our managers to have ESG as


the Financial Conduct


Authority in August. So it is pretty close to being ready. Because there have been delays, we are going to have to go around and speak to our clients again and look at who is ready to put money in the ground over the next few months. It will be of significant scale, probably about three or four investors, but I am not able to put an exact number on it just yet.


There are groups where members of the eight pools come together to discuss their work or to co-invest. What are benefits of participating in these discussions? We learn from each other. We are all doing something that is quite new and innova- tive. The important issue is that we all


London CIV’s funds: UK equities, global equities, emerging market equities, multi asset and fixed income


started from slightly different places, so it is about learning what the others do and how they have done it because we end up doing these things slightly differently. I was in Leeds recently talking to colleagues at Border to Coast and heard about their journey. We are not going to do the same thing because we have different starting points. They have a history of direct investment, which we have not had in London. It is just interesting to compare notes on how to structure funds and the options in terms of the different legal structures that are available. We all have an interface with the Ministry of Housing, Communities and Local Gov- ernment and make sure that we are having good conversations with them about the future of pooling, which is important. It is always useful to share ideas and exper- tise and if someone else has done it, why invent it yourself.


We are halfway through the year and it seems from our conversation that we can expect positive news-flow in the second half of 2019? Yes. There has been good progress to date, but we are now entering a new phase where we are fully resourced, have the top team in place and are finding a way to work more positively with our shareholders/investors that will enable us to move forward much more quickly.


Issue 85 | June–July 2019 | portfolio institutional | 21


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