LGPS Central

Pooling UpdateMelanie Stokes

LGPS PoolingThat was then…..

May 2013Speech by Brandon Lewis

(Local Government Minister) opened up the

prospect of LGPS fund mergers

June 2013‘Call for Evidence’ consultation into

future structure of LGPS

May 2014Government’s response

“No mergers” Launch ‘Opportunities for

collaboration, cost savings and efficiencies’ consultation

1

July 2015Summer Budget

‘pool investments to significantly reduce costs, while maintaining overall

investment performance’ ‘sufficiently ambitious proposals’

2 3 4 5

Nov 2015Investment Reform Criteria

and Guidance issued. ‘Backstop’ Investment

Regulation consultation

6 7

Feb 2016LGPS Funds’ initial

response to consultation

July 2016LGPS Funds’

detailed response to Criteria

8

April 2018Start to transition

assets

1

Government Criteria A reminder of what it was all about…..

Benefits of scale (at least £25bn in assets)

Strong governance and decision making

Reduced costs and excellent value for money

An improved capacity and capability to invest in infrastructure

1 2 3 4

2

1. Scale – LGPS Central 8 Partner Funds

£40bn+

3

Pool Governance

Administering Authority

Ongoing Duties

Shareholder

Rights Investor Rights

Board of Directors and

Operator Structure

2. Governance – Overview

4

2. Governance – LGPS Central

Local

Pensions

Board

Pensions

Committee

Administering

Authority

Shareholder

Forum (Company

matters)

Joint

Committee

(Client matters)

Practitioners’

Advisory Forum

Shareholder/Client

LGPS Central

(Operator

Company)

Board

Financial

Conduct

Authorit

yCollective

Investmen

t Vehicles

Remuneration

CommitteeNominations

Committee

Audit Risk &

Compliance

Committee

Executive

Committee

Investment

Committee

Company/Regulator

5

Fund Pool

• Liabilities remain• Triennial Valuation• Funding strategy• Contribution rate strategy• Investment Strategy and

Strategic Asset Allocation• Relationship with pool

(Shareholder & Investor)• Pension Fund performance

monitoring

2. Administering Authorities ongoing duties….

•Structure and range of funds

offered

•Manager Hiring and Firing

•Manager Monitoring

•Relationship with Funds

•Manager Performance

•Regulatory requirements

(FCA)

6

COSTS:

•Set up cost of the new company/pool

•Ongoing running costs of the new company/pool

•Transition costs as we move to new managers appointed by the Pool

•Regulatory Capital to ensure the new company is recognised as a going concern by the Financial Conduct Authority (FCA)

SAVINGS:

•Investment Management Fees are expected to be lower due to economies of scale

3. Costs And Value For Money

7

3. Costs And Value For Money

8

LGPS CENTRAL By 2034 ESTIMATED CUMULATIVE SAVINGS of £247.7m

• Government is encouraging LGPS funds to invest more in

infrastructure

• Weighted target allocation for LGPS Central funds has grown

to 4% (from virtually 0% in 2013), with 1.5% actually invested

• Submission states minimum 5% but up to 6% or 7% estimated,

although this will depend on each Funds’ investment strategy

• Pensions Panel approved principle of submission with up to 5%

invested in infrastructure through the Pool

• Working with other Pools to create a national infrastructure

platform

• May take several years to get suitable process and suitable

investable schemes

• Local infrastructure investments considered entirely on merit.

4. Infrastructure

9

This is now….

Key milestones 2017-18

11

ACS

• Equities

• Bonds

• Property

LLP

• Infrastructure

• Private equity

• Target return

Life Policies

• Equities

• Bonds

LGPS Central will offer the investments needed to deliver the Partner Funds’ investment strategies

Aim to provide the most appropriate structure to access asset classes across different styles and geographies:

LGPS Central Investment Offering

12

13

LGPS Central Investment Offering

June JulyAugust /

September/OctoberNovember

RFP responses by 20June

Evaluations of RFPs completed 23 July

Site visits late July/early August

Award of contract 24 August

Appointment of Inalytics and transition manager currently work in progress.

Sub-fund ‘go-live’ date 30 November 2018

Active External Global Equity Multi Manager Sub Fund

Source: LGPS Central Limited

Fund Receives FCA Approval

14

ACS sub-funds and other pooled funds in planning

ACS AND POOLED SUB

FUNDS

FUND STRUCTURE CURRENT TRANSITION

PHASE

ESTIMATED

LAUNCH DATE

EST AUM

Global Active External

Equities

ACS Finalising 30th November

2018

2,500

GEM Active External

Equities

ACS PQQ/Selection Q1 2019 1,500

UK Active Equities Internal ACS Planning 2019 1,200

Private Equity 2018 vintage SLLP Implementing 16th November

2019

200 +

Global Factor Based

Strategy

ACS Planning 2019 1,000

Global Active Internal

Equities

ACS Planning 2019 500

Global Corporate Bonds ACS Product Development Q1 2019 1,500

Global Multi Asset Credit ACS Planning 2019 1,182

Fixed Income G10 ACS Planning 2019 1,000

Infrastructure ACS, Open ended

fund, LP

Planning 2019 300

Property ACS, Open ended

fund, LP

Planning 2019 300

Target Return ACS, Open ended

fund, LP

Planning 2019 700

TOTAL AUM 11,88215

Any Questions?