Agenda item

The Committee considered the LGPS Central update report. The details were set out in the report.

The Committee received a presentation by the Non-Executive Chair, Joanne Segars and Chief Executive Officer, Andrew Warwick-Thompson of LGPS Central.

In the ensuing debate, the following principal points were raised:

·         Was it reasonable and sensible to set up the LGPS Pooling arrangements in such a short timeframe? Joanne Segars acknowledged that the timescale was short however she would not have agreed to the activation of the Pool arrangements on 1 April if she did not think that everything was ready and in accordance with the necessary financial regulations. Andrew Warwick-Thompson added that it was not possible to take over the whole £40bn investment from the outset but instead a rolling programme of investment would be introduced

·         In response to a query about the decision to maintain split site offices in Wolverhampton and Matlock, Derbyshire, Joanne Segars explained that the split site arrangements had been introduced largely to coincide with the location of existing staff members. This approach would be reviewed in the future

·         Due to the geographical location of the offices, there was an impression that the culture of the Pool would be dominated by the West Midlands and Derbyshire Pension Funds. In response Joanne Segars commented that she was very clear that the Central Pool was not the West Midlands Pension Fund but a new entity and this was the approach being taken

·         In relation to the governance and ethos of the Pool, was it anticipated that the Shareholders Forum would have an influence over the Board and its thinking? Andrew Warwick-Thompson responded that the initial focus had been on the Derbyshire and West Midlands Pension Funds out of necessity because they were the first funds to be launched. All the executive team had been recruited from outside those funds and of the Investment Directors, roughly half had been recruited from partner funds and half from the private sector. It was anticipated that as product development progressed, partner funds, who had not been as involved up to now, would be brought into the process. The importance of meeting the objectives of all partner funds going forward was recognised

·         In response to a query, Andrew Warwick-Thompson commented that the Pool would be providing an advisory service on all investment matters to all partner funds. This service could be extended to cover governance issues if desired

·         There was no position set aside within the structure of the Pool, with direct responsibility for communications. Joanne Segars explained that communication was the responsibility of all Board members. She added that she was keen to work with all elected members and Shareholder representatives

·         There was a degree of uncertainty about the scale of the cost of the transition arrangements. Would the Pool be appointing transition managers on a case-by-case basis?  Andrew Warwick-Thompson responded that the best practice advice suggested that different transition managers should be appointed. Help would be provided but the intention was for individual funds to have access to a framework which would help match them with the appropriate transition managers

·         Was it intended to manage passive investments internally? Andrew Warwick-Thompson advised that this was a possibility, depending on the business case and the level of expertise available internally

·         In response to a query, Andrew Warwick-Thompson indicated that the most challenging aspect of the key deliverables for 2018/19 related to the Product Development and Delivery Plans 2018/19 – 2020/21. It was important to establish a common approach to reporting and development suites. In addition, the right people needed to be engaged to ensure that the product development was not too painful and tortuous and ensure that the appropriate product services were available to achieve cost savings. Joanne Segars added that it was also a priority to recruit staff as quickly as possible

·         Would the Pool be taking account of the requirements and approach to investment of individual funds?  Andrew Warwick-Thompson commented that a transitional plan had been submitted to the FCA although it was acknowledged that strategy reviews had taken place since that submission. It was therefore important to talk to individual funds about their current strategies and determine which ones to prioritise and promote with commonality. It was anticipated that by May 2018 all the investment management positions would be recruited. Conversations would then be held with Worcestershire Pension Fund on a regular basis

·         In response to a question, Andrew Warwick-Thompson explained that in order to achieve the proposed cost savings, a limited number of products/services would be introduced. There would be discipline over the number of new products/services introduced and those subsequently relinquished. Joanne Segars added that the Pool had responsibility for asset management whereas the pension funds would oversee asset allocation

·         The monitoring of the performance of the Pool would be an important challenge for the organisation. Andrew Warwick-Thompson responded that the Pool's performance and parameters would be continuously monitored

·         Worcestershire Pension Fund had placed an emphasis on risk management to ensure that risks were appropriately balanced within its asset allocation. Would the Pool be taking a similar approach? Andrew Warwick-Thompson advised that the Pool would be looking to mix and match products to achieve the appropriate level of risk tolerance for each client Pension Fund.

RESOLVED that:

a)    The LGPS Central Update be noted; and

b)    The LGPS Central presentation be noted.