Q&A with Jill Davys

Jill Davys is head of financial services at the London Borough of Hackney and is involved in a number of national frameworks for LGPS administering authorities and the London LGPS CIV.

Room151: What’s happening with the LGPS frameworks and how do they work?

Jill Davys: So far we’ve set up national frameworks for LGPS funds to access investment consultancy, actuarial and custody services and we’re currently working on another to supply legal services. We go through the due diligence and procurement process with service providers who are then appointed to the framework and then other funds don’t need to repeat all that work themselves. Norfolk is the lead authority on the frameworks and there are various other authorities involved.

Effectively the frameworks reduces the amount of time authorities have to spend on doing things like due diligence and negotiation of terms and conditions and there are also ceiling prices which providers commit to. So funds have benefited from some pretty good fee reductions by calling off suppliers from the frameworks.

R151: What’s the take up been like?

JD: So far 30 contracts have been awarded from the various frameworks with a further 19 in the pipeline. Estimated savings to the end of March 2014 on the contracts was just under £8m over the life of the contracts and we estimate that were all LGPS funds to use the frameworks, then savings could amount to £126m. They are delivering real savings to funds and their employers today and we think it’s is a real achievement for collaborative working.

R151: Are you building frameworks for investment management services?

JD: That’s much harder to do but the group of us working on the frameworks are looking at the feasibility of it.  So far we’ve set up frameworks where there have been relatively few providers of the services in question. So, for example, with actuarial services there are only four providers to LGPS funds.  That makes setting up the framework much more achievable. With fund managers, you could have 70 or 80 fund managers for equities alone.  What happens if you do all the due diligence on the funds, appoint five or six to a framework and then one of those appointed loses its lead manager?  It’s a much more fluid sector than some of the others we’ve worked on so far so it’s inevitably going to be more difficult to capture the right offering in a framework.

R151: There’s continuous uncertainty surrounding the LGPS. Last week even Boris weighed into the discussion on fund mergers. Does that uncertainty make managing the assets any harder?

JD: Comments such as the one from Boris aren’t particularly helpful.  No one is really sure how he came up with 39,000 public sector pension funds – Lord Hutton found about 400 when he was doing his report so attention to detail from some politicians in the debate is a bit lacking. But despite the uncertainty we still have to get on and manage the funds. Yes, things might change next year but until they do we still have a duty of care to make sure the assets are managed properly.

R151: Do you think the various LGPS consultations and debate has been a valuable process?

JD: I think a lot of the efficiency work was already underway. The frameworks, or work on them, predate the consultation and the London CIV was already being discussed.  Perhaps the consultation has added a little impetus but I think we were already thinking in terms of efficiency savings.

R151: What stage is the London CIV at?

JD: I believe the first board meeting is today (Wednesday 14^th, October) actually so it’s established, there’s a company there and there’s a lot of work going on to try and get it up and running in the first half of next year.  There’s an interim board in place and we’re currently going through a procurement process to appoint an asset service provider which we need in place before we go to the FCA for registration. We’ve collated all the investment data for the various boroughs involved so we know where everyone is invested and we are speaking to fund managers about the platform we’re going to launch which the funds can invest through. We’re starting there with some of the bigger assets classes like global equities, UK equities and fixed income.

R151: Do you envisage a large transfer of assets to new funds when the platform goes live?

JD: I think what we’re hoping is to be able to move existing managers on to the platform making it easy for funds to continue to invest with their current managers but it will also give them the opportunity to change managers should they wish to do so. Ultimately decisions about investment and asset allocation will remain at the local level which is absolutely key as far as all of the boroughs are concerned.

R151: What other challenges are you seeing for the LGPS?

JD: We all have to put our local pension boards in place before April of next year and we’re yet to receive the guidance from DCLG on that. It’s a completely new board and with the existing pensions committees still in place for all the decision making it’s not clear yet what this new board will do and where it will add value.  The board has to be made up of equal numbers of employer and scheme member representatives and from experience I know that getting scheme members involved with the requisite knowledge, skills and competency is far from straightforward.