Agenda item

The Committee considered the LGPS Central (LGPSC) Update and a presentation by Gordon Ross of LGPS Central.

In the ensuing debate, the following points were made:

·         In response to a query, Gordon Ross confirmed that John Nestor and Eithne McManus had left their roles as Non-Executive Directors with LGPSC

·         The recent recruitment by LGPSC of a Chief Legal, Compliance and Risk Officer was welcomed

·         In response to a query, Gordon Ross indicated that LGPSC had been recruiting staff at graduate level. As part of the recruitment process, candidates were required to undertake psychometric tests. New recruits received a two year training programme which included rotation between different elements of the work of the pool

·         What reasons and been provided by staff for leaving the pool and what measures had LGPSC undertaken to prevent further departures? Gordon Ross explained that some staff had left for better paid opportunities elsewhere. To try and retain staff, LGPSC provided each member of staff with a career path within the pool. Staff were paid as well as possible and were offered the opportunity to join an attractive pension scheme. The tuition provided to new recruits was more focused and provided a greater range of learning than other companies could offer. Recruitment had been particularly impacted by remote working as staff were able to take higher paid jobs without having to move location. LGPSC had decided not to require staff to stay with the pool for a certain length of time after joining

·         In response to a query relating to the Global active emerging markets fund Worcestershire were invested in, Gordon Ross commented that a three year review process was in place to ensure its funding arrangements were fit-for-purpose and was likely to be concluded in September 2022

·         This Fund’s investment philosophy had generally been a preference for a conviction investment approach and therefore over-diversification of managers was not considered suitable. Would LGPSC be taking on board this Fund’s views in relation to the emerging markets review? Gordon Ross responded that all partner views would be taken into account as part of the 3 year investment review

·         In relation to a query about benchmarking, Gordon Ross explained that LGPSC used benchmarks that reflected the relevant markets

·         Was LGPSC confident that despite the recent poor performance in the emerging markets that circumstances would improve. Gordon Ross stated that the performance in the emerging markets had been greatly impacted by the Russian situation. In addition, because performance was measured against traditional market benchmarks, there had been a degree of lag. He was confident that over the longer term, performance would improve

·         Were there any lessons to learn from the Russian situation? Gordon Ross responded that there was a need to delve deeper into companies within the emerging markets and to gain a greater understanding of how markets reacted to world events

·         Did LGPSC analyse the approaches taken by partner funds to see if they did anything differently? Gordon Ross commented that in order to develop appropriate products, it was important that LGPSC had an understanding of the needs and workings of partner funds

·         Philip Hebson commented that emerging markets had had a particularly difficult recent period, not just because of the Russian situation but also as a result of the response to the recent Covid outbreak in China. As the Fund worked through the strategic asset allocation review, thought needed to be given to the investment approach taken in emerging markets. The attitude of China to human rights issues was also a major cause of concern. It would be helpful for the Fund to have input in these issues but the question was where the line should be drawn in relation to these types of investment issues and the risk appetite for investments on an ethical basis rather than just on a sustainable basis. Gordon Ross added that ESG was an integral part of LGPSC’s investment strategy however he acknowledged that this approach differed in the emerging markets. China had its own economic issues which made it less of a financial draw than before

·         In response to a query, Philip Hebson commented that LGPSC had been more responsive to the views of partner funds in relation to the situation in Russia than a number of other pools. In relation to emerging markets, LGPSC were looking to address existing performance issues to an extent by adding a value manager to the portfolio but it was felt that adding another investment manager was not the answer. This Fund needed to consider an alternative approach if LGPSC continued with that approach and failed to meet targets

·         It was queried why LGPSC had located in Wolverhampton. Philip Hebson responded that there were financial benefits in comparison to Birmingham. However, LGPSC insisted that staff attended their offices at least two days a week and homeworking had had an impact on their ability to recruit

·         It was commented that homeworking had a negative impact on staff performance.

RESOLVED that the LGPS Central update and presentation be noted.