2015 Review: LGPS encounters with Eurostar, wind farms and reform
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George Graham of Lancashire’s pension fund reviews his year working on a partnership, attempting to buy Eurostar and a wind farm acquisition.
When I applied for my current job as part of a council reorganisation, a number of colleagues remarked that I was opting for the quiet life and early retirement. They couldn’t have been much further from the truth.
Just over 12 months after getting my dream job the pace of life seems to be accelerating. As we come up to the end of the year it seems appropriate to reflect on what has happened and look towards what lies in store.
Like every other LGPS fund, we in Lancashire started the year with both the uncertainty over the reform process and the need to implement the new governance reforms, with regulations that were, and to some degree still, unclear.
We had, though, added to our agenda by initiating partnership discussions with the London Pensions Fund Authority, in line with our philosophical support for collaboration.
Geeky
So, how’s it all worked out? Worryingly I can now recite the Preston/London train timetable, which even for me is worryingly geeky. However, we have achieved much more than that.
Our partnership is moving through the process of regulatory approval and we are gearing up to become operational on 1st April, and welcome anyone else who wishes to work with us.
During the year we also established our local pension board on time and received over 10,000 votes from scheme members for the four member seats.
This was a significant exercise in engagement, and incidentally in data cleansing, helping us identify deferred members who hadn’t told us of a change of address.
The operation of the board is in its early stages, but it is beginning to ask us different questions, in particular focusing on the totality of the customer journey that raise issues, which we have been aware of but not previously seen as ours to address.
Train sets
This emphasises another change in attitude, which I think we will see become greater in future, primarily making sure scheme employers take their responsibilities seriously.
At the beginning of the year we tried unsuccessfully to add a big train set to our portfolio (or at least the UK government’s share of Eurostar) but closed the year by buying some Portuguese wind farms. Direct investment works, but you need the people and the appetite to take it on. I am very lucky to have a team who can do these deals and also a pension fund committee with the appetite to invest in this way.
Clearly, though, however well any fund has done on implementing governance reforms, and running and investing its fund, the big thing this year and 2016 is the broader reform agenda, which has now crystallised around the creation of bigger asset pools.
Done right this can deliver both cost savings and improved returns – our work with LPFA demonstrates the business case for this – but it is not an easy trick to pull off.
Pools that are created by funds with similar broad investment approaches are likely to cost less to create in terms of transition costs than pools involving very different approaches.
Additionally, the pushing of passive investment as some sort of panacea remains a strand in the Government’s thinking, although there appears to be a willingness to accept evidence to the contrary, something I am sure many funds can provide.
So over the next 12 months I expect to be spending a lot of time with colleagues discussing how to create asset pools that are governed in a way that meets both FCA requirements in terms of independence and the seemingly contradictory desire for local control.
What was that old Chinese curse about living in interesting times?
Have a good new year.
George Graham is
director of the
Lancashire County Pension Fund
