Fund raiders

Agent 151 is a senior local authority finance director and S151 officer. The agent writes exclusively for Room151 and is licensed to speak candidly. 

Hello Councillor… I want to talk to you about infrastructure investment.  Yes, roads and bridges, street lighting, schools, housing, that kind of thing.  What’s that?  Oh, you’re keen on it.  You want a lot more of it.  Really?   It creates jobs and gives the local economy a boost… yes, I see… encourages developers… mmm… and improves local amenities and transport.

Might even win you a few votes, ha ha.  Well, I can see why you like it!  There’s no money for it?  Well, that is a bit of a snag, isn’t it.  That’s why I’m ringing, actually.  I know where you can find the money.  Yes I do.  For free! Yes, I know you can’t put the council tax up without holding a referendum. Yes, I thought you might have sold all your surplus assets already.  Yes, I heard about the funding cuts.  No, I’m not a con man, really I’m not.

The thing is, Councillor, the answer is obvious when you think about it.  The money you need is tied up in the council’s pension fund.  It’s just sitting around, not doing very much.  Tens of millions.  Hundreds of millions.  One hundred billion, nationally.  Makes you wonder why no one has thought of it before!

The problem is the old duffers on your pension fund committee.  And the trade unions.  No imagination, you see.  Won’t try anything new.  Too risky for them.  No wonder the employer contributions are going up so steeply!  You need to get rid of the old thinking, get some new blood in.  What’s that?  You’ve been chairing the pension fund committee for twenty five years?  I meant to congratulate you on the fund’s performance last year, actually.  Top quartile is not bad at all in the current climate.  Room for some improvement though, wouldn’t you say?  This idea could get you to number one.

How will it work?  Well, our idea is to set up an infrastructure fund that the pension fund can invest in.  What sort of return?  Well that would depend on the projects, how much risk… the usual.  Not much appetite for risk, you say?  I see.  What kind of projects?  Well, what do you want?   Housing?  Transport hub?  No, I couldn’t guarantee that the projects would be within your boundaries.  Not with your low risk appetite.  Could be anywhere in the country, to be honest.  There’s a good chance of at least one of them being in your area, I should think.  Well, I don’t see why you’re saying that!  No, we haven’t set it up yet.  We’re getting lots of interest in the idea in London.  Alright, let’s leave that one for now, then.  I’ll talk to the officers about a presentation to the committee.  Maybe early next year.

How about a local bond, then?  That way you can guarantee the scheme will be local. I mean, your council has a credit rating better than many European governments these days, ha ha. The pension fund can buy into that, you see.  What sort of return will it make for the fund?  Well, it will have to be structured to make it attractive for all investors, so that will include the fund. Well I suppose that does mean the council will be paying more than PWLB rates, yes, you’re right.  But they are at a record low – how long is that going to last?  Yes, the council will act as funder for the scheme… or even developer if you like.  Yes, that does mean some of the risk falls on the council tax payer.  Well yes, it would be better if the banks took the risk, I suppose, from that point of view.  Yes, it is traditionally their role.  But they won’t, will they.  Not these days. Well, not for that sort of return, anyway.

You have to go?  Well, it’s been a pleasure, as always.  We’ve got a stand at the conference this year.  Do drop by.  You can’t miss it.  We’ve got a giant one armed bandit.  Should be fun…

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07 February 2013
2nd LAPF Strategic Investment Forum (The Landmark Hotel, London)
Strategic investment thinking for senior LGPS investment officers, their independent advisers and heads of LGPS investment committees. Jointly organised by AIConferences and LAPF Investments Magazine
Free places offered on a first-come-first-served basis to qualifying delegates
Email: register@aiconferences.com