• Home
  • About
  • Subscribe
  • Conference
  • Events Calendar
  • Webcast151
  • MOTB
  • Log In
  • Register

Room 151

  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews

Jeff Houston: LGPS and investment cost transparency

0
  • by Guest
  • in Blogs · LGPSi
  • — 17 Apr, 2018

The LGPS Advisory Board has been the first to sign up to a new disclosure template for investment costs. Jeff Houston explains what’s happening and why.

It seems a very short time since the mantra of “net return is all” was in the ascendancy throughout the LGPS and investment cost reporting was, by and large, restricted to invoiced fees. It is, of course, true that only net returns can pay pensions but for a number of reasons, including reputational and regulatory, the price of achieving that return is now firmly on the agenda.

The move toward investment cost transparency is an important factor in the perception of the LGPS as being value-led. Increased transparency is now included in CIPFA accounting standards and is an objective in the government’s criteria for pooling investments. Finally, the introduction of MiFID II has seen a greater obligation on managers to fully report costs.

The LGPS Advisory Board’s voluntary Code of Transparency was launched in May 2017.  Signatories to the code commit to the principles of transparent reporting and agree to complete a template of costs for their clients and submit to third party compliance checks. In return they are named on the board’s website and are able to use the code’s “tick” logo in their marketing material.

At the core of the code is a listed assets template which was developed during with the help of the West Midlands Pension Fund, Dr Chris Sier and the Investment Association.

Since the launch, the number of code signatories has grown at a steady rate, despite the restriction to listed assets, and now includes over 50 asset managers covering over £160bn of assets.

Following the release of the FCA’s asset management market study in the summer of 2017, the Institutional Disclosure Working Group (IDWG) was formed in order to “gain agreement on disclosure templates for asset management services provided to institutional investors.”

The group, chaired by Dr Sier, includes asset owners, managers and academics, and is currently developing a range of templates at both the account (manager) and user (trustee) levels. The templates will cover all of the major asset classes and are due to be released in the summer of this year.

At its meeting on 26th February, the Advisory Board agreed to adopt the IDWG templates, when available, for use in its code. This decision was taken for a number of reasons including:

  • Consistency of reporting. It makes sense for both managers and asset owners if a standard format for reporting is used across the institutional space.
  • Adoption of the IDWG templates will provide a route into the Code for those alternative and property managers who until now have not been able to sign up.  At the meeting of the 26th, the Board also agreed to an amendment to the Code which enables these managers to sign up in advance of the arrival of the IDWG templates.
  • The IDWG user template provides a useful summary of costs for LGPS committees together with the ability to drill down into the detail of account templates when required.
  • Whichever body takes over, the work of the IDWG will continue to develop and maintain an effective and relevant set of templates.

The adoption of the IDWG templates will, however, require existing signatories to make changes to their reporting systems.

The new templates will differ in a number of ways. Firstly, there will be a single listed template rather than separate segregated mandate and pooled fund versions. Secondly, there will be an increased degree of detail, although the actual extent of that detail is still to be determined.

Accordingly, the board agreed that from the point of release of the IDWG templates, although new signatories to the code will be obliged to use them, existing signatories will benefit from a transition period of up to 12 months.

Beyond the introduction of new templates, both the board and the IDWG will continue to face two important challenges. The first is to ensure LGPS committees and institutional trustees are able to make best use of the increased knowledge available to them.

The other, perhaps more daunting, challenge is to ensure that increased transparency is not mistaken by scheme stakeholders, the press and industry commentators for an increase in costs. It would be a shame if, in exposing costs in order to better manage them, we miss the opportunity to promote a better understanding of the mutually-beneficial relationship between asset owners and managers.

Jeff Houston is head of pensions at the Local Government Association.

 

Share

You may also like...

  • Countdown to Room151 LGPS Asset Allocation Forum Countdown to Room151 LGPS Asset Allocation Forum 22 Oct, 2019
  • The euro, brinkmanship and market distress The euro, brinkmanship and market distress 24 Nov, 2011
  • Sovereignty trumps common sense at most councils Sovereignty trumps common sense at most councils 6 Jun, 2013
  • Graham Liddell: How to make a great shared service Graham Liddell: How to make a great shared service 2 May, 2018

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • Register to become a Room151 user

  • Latest tweets

    Room151 2 days ago

    Will new public procurement rules offer the best commercial results?: The government has issued a green paper on reforming procurement rules. Helen Randall and Rebecca Rees examine the proposals and argue they may not go far enough. The Cabinet… dlvr.it/Rqtw6T pic.twitter.com/9GiVTkL08U

    Room151 7 days ago

    The vaccine may help settle cash flows but inflation remains a risk: Sponsored article: Lauren Sewell examines the prospects for long-term borrowing as Brexit settles and vaccines are deployed against Covid-19. On the 9th October 2019 Whitehall sent… dlvr.it/RqZXCr pic.twitter.com/PzgOZOGQ0k

    Room151 7 days ago

    ESG in liquidity: Sponsored article: Gavin Haywood looks at the integration of ESG in Federated Hermes’ money market funds. Federated Hermes has over 300 public sector clients invested in our AAA rated money[...] dlvr.it/RqZX5f pic.twitter.com/E87sBXsay8

    Room151 1 week ago

    New realities of investing cash and liquidity: “What to do now?”: Sponsored article: Brian Buck looks at the “unique challenge” for cash management strategies. As investors assess the ongoing impact of the pandemic on their business, levels of cash and… dlvr.it/RqVbk9 pic.twitter.com/ZElVASmEUV

    Room151 1 week ago

    Extra finance promised by the government receives a broad welcome: Sponsored article: The financial pressures facing local authorities this year continue to pose challenges for council treasurers. While the launch of the UK’s Covid-19 vaccination… dlvr.it/RqTzTF pic.twitter.com/HCjH0pyHR5

    Room151 1 week ago

    A savvy approach to managing your cash: Sponsored article: Caroline Hedges examines the need for active cash management to achieve a higher than average return. Last year saw the already mountainous pile of negative-yielding debt around the[...] dlvr.it/RqTzMK pic.twitter.com/uP0RQYTJLt

    Room151 1 week ago

    Putting alternatives at the heart of multi-asset portfolios: Sponsored article: Nick Edwardson looks at the assets that provide the “most attractive opportunities”. We believe that asset allocation is the primary driver of investment returns and that the… dlvr.it/RqQ2Qt pic.twitter.com/WLBzvRRRUQ

    Room151 1 week ago

    Thriving in the pandemic: Avoiding the stragglers: Sponsored article: George Crowdy looks at the sectors providing opportunities for sustainable investment. Throughout much of 2020, we talked about why sustainable investing has thrived in the pandemic,… dlvr.it/RqQ2NQ pic.twitter.com/dxiPWKFsPl

    Room151 1 week ago

    The development of CCLA’s mental health benchmark: Sponsored article: Amy Browne examines the importance of investing in mental health in the workplace. We are living through a public health emergency in more ways than one. Physical health[...] dlvr.it/RqQ2Jx pic.twitter.com/o6yRSCX3oF

    Room151 1 week ago

    Brexit: What the EU trade deal means for the UK economy: Sponsored article: Hetal Mehta looks at the impact of Brexit on economic prospects. Four and a half years after voting to leave the EU, on Christmas Eve the UK finally[...] dlvr.it/RqLBDt pic.twitter.com/No62srfE8h

    Room151 1 week ago

    Cash dethroned: The quest for liquid yield: Sponsored article: Peter Hunt and George Carne ask how treasury departments can balance the need for yield and liquidity. The massive stimulus and waves of liquidity provided by central banks[...] dlvr.it/RqLBDj pic.twitter.com/05g6Zhu1kU

    Room151 1 week ago

    Richard Harbord: Delayed “capital determinations” make section 25 opinions a new crunch point: The severe pressure on local government budgets now means section 151 officers confront a tricky call on  whether they can make a judgement on the robustness… dlvr.it/RqLBDV pic.twitter.com/vTAbDKFzkI

    Room151 1 month ago

    PWLB Consultation: Analysis straight from Dickens: Helen Radall and Paul McDermott present a legal examination of the new PWLB borrowing rules as Charles Dickens might have imagined it. Free and easy PWLB (“Marley” to his friends)[...] dlvr.it/RnmwLq pic.twitter.com/yFxcPrQqEG

    Room151 1 month ago

    Room151’s top stories from a momentous year: 2020 was the year in which local government grappled with Covid-19, funding strains, controversy over borrowing rules and the threat of financial collapse. It has been an exhausting and historic[...] dlvr.it/RnlpZg pic.twitter.com/g3myNyox6J

    Room151 1 month ago

    Tracy Bingham: 2020, a year best forgotten but also one of learning: Many will rush to erase 2020 from their memories but, writes Tracy Bingham, there were also many lessons about finance teams, strategic planning and leadership. 2020: A year we’d… dlvr.it/RnlpY2 pic.twitter.com/m7G1krrtCu

    Room151 1 month ago

    Settlement must address ‘precarious’ local government finances: Dan Bates crosses his fingers for “no nasty surprises” in this week’s funding settlement but argues the “bigger prize” is post-Covid financial certainty. Thursday (17 December) should be the… dlvr.it/Rnj9dG pic.twitter.com/KLKjjuBqJE

    Room151 1 month ago

    PWLB consultation: Big change on the way but there are ‘grey areas’ and opportunities: The consultation on PWLB borrowing has concluded creating a new landscape for funding property acquisition. Our experts look at the implications. Tracie Langley The… dlvr.it/RndRvJ pic.twitter.com/KEqXEBmEfq

  • Categories

    • 151 News
    • Agent 151
    • Blogs
    • Chris Buss
    • Cllr John Clancy
    • Dan Bates
    • David Crum
    • David Green
    • Development
    • Forum
    • Funding
    • Graham Liddell
    • Ian O'Donnell
    • Interviews
    • Jackie Shute
    • James Bevan
    • Jobs
    • LGPSi
    • Mark Finnegan
    • Recent Posts
    • Resources
    • Richard Harbord
    • Stephen Fitzgerald
    • Stephen Sheen
    • Steve Bishop
    • Technical
    • Treasury
    • Uncategorized
  • Archives

    • 2021
    • 2020
    • 2019
    • 2018
    • 2017
    • 2016
    • 2015
    • 2014
    • 2013
    • 2012
    • 2011
  • Previous story Karen Shackleton: The cost conundrum of active managers
  • Next story LGPS Q&A: Chris Rule of Local Pensions Partnership on housing and regeneration

© Copyright 2021 Room 151. Typegrid Theme by WPBandit.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we'll assume that you are happy to receive all cookies from this website.OK