Joint Pensions Committee - Tuesday 7 January 2025, 7:15pm - Wandsworth Council Webcasting

Joint Pensions Committee
Tuesday, 7th January 2025 at 7:15pm 

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  1. Webcast Finished

Good evening, everybody.
My name is Councillor Norman Marshall.
I'm chair of the Joint Pensions Committee.
We are about to start.
We've had apologies from Councillor Serra and Councillor Crookedake and one or two more
members of the committee may be about to join us.
In the meantime, I'm going to ask members of the Committee just to state your presence.
I'll call your names in alphabetical order.
Please switch on your microphone to confirm your attendance.
Councillor Caddy.
Present.
Deputy Chair, Councillor Craigy.
Good evening.
Councillor Crooktaker's had apologies.
Councillor Dickard may well be on his way.
Councillor Gasser I know is in the building so I think she might be there very shortly.
Councillor Ireland.
Good evening.
And Councillor Pridham.
Present.
We have a number of officers present who will introduce themselves when they address the
committee.
Item one are the minutes of our meeting on the 15th of October which you have all received
and are published.

1 Minutes - 15 October 2024

Any comments from any members of the committee?
So those are approved then.
Thank you.
Good evening, Councillor Dickard.
We've just done the roll call, but welcome.
Disclosable pecuniary interests.
Are there any declarations of pecuniary or other registral or non -registrable interests?
No.
Thank you.
Item 3, minutes of the local pension board.

3 Minutes of Local Pension Board - 4 November 2024

Please can we note the minutes of the local pension board for information if there are
any questions?
No.
Noted.
Thank you.

4 Response to MHCLG LGPS Consultation "Fit for the Future" (Paper No 24/404)

And item four, response to the MHLC -CLG -LGPS, Lot of Initials Consultation, Fit for the
Future.
The Director of Finance will introduce this report and he'll get the acronyms right for
me.
Thank you, Chair.
So the paper in front of you outlines what the government are seeking to get a response
from the consultation.
We've discussed previously about calls for evidence that the government is looking at
doing how Pauling operates, how it's been working and moving that forward to the next
stage.
And I think the way that it's been set out in the documentation that's linked to this
report, you'll see what the government's agenda is.
And many of the activities that is currently taken by this Committee and by officers within the Fund would transfer over to the pool if the proposals outlined here are taken forward in their entirety.
Outlined really on paragraph 7 of the report really shows you what the proposals are looking to do.
So the committee will remain responsible for setting high level investment strategies.
But in reality that will be restricted to when it's talking about the asset allocation
element just at a high level, why you'll be saying equity, you won't be saying you want
elements in sustainable equity, elements in growth, elements in UK versus global.
and even more importantly you won't have the ability to decide whether you want to be active
or passive because the government believe that is an implementation role rather than
it being a risk management role and that's what's transferring over to London SIV on
our behalf.
Similarly, when we're looking at getting advice on how all of these things should be functioned,
who would you be turning to?
At present, we use MRSA as an independent advisor to be able to give us that overview
on our approach and similarly potentially challenge the role of the pool and the role
of any fund managers that we currently have.
Government are proposing to take that away and so you'll be seeking and you'll only
get in your principal advice from the pool who will also be responsible for delivering
the implementation on the returns.
Pools themselves will be required to be regulated,
which gives some comfort that there should be
sufficient oversight on them and they should have
the relevant expertise to be able to do that.
Five of the eight pools are currently FCA regulated,
London SIV being one of those.
And what we will be required to do is to transfer
all of our assets under their management,
and that will need to be completed by March 2026.
Currently at the moment, we've always taken the approach that we're expected to pool all
the money, but we had the ability, if we believe genuinely that the strategy was not aligned
to our own, we had the option to invest elsewhere and would report back on a comply and or explain
basis.
That's gone.
there is no discretion now. 100 % of the assets will need to be managed by the
pool. The definition of managed we don't know at present and there will be you
know exactly what it means by that. The reason I'm highlighting on that is
some of the private market assets are going to be far more difficult to
transition than the sort of your equity and other sort of liquid based assets.
And the pools themselves, they'll be here later on the agenda when we're talking in
the closed section of the meeting about performance, but no doubt you may have some questions you
may want to ask them about their capacity.
Because what they'll be looking to try to do in this intervening period is grow their
own resources and staffing and gear up and develop a plan for how they're going to take
on these responsibilities from April 2026.
So there is a table in the paper which sort of highlights this, which is on the top of
page 16, which sort of really starts to explain what the current role that we have and the
proposed role going forward.
So if we look at it and starting at the top, you'll see the investment objectives, the
high level element, i .e. the return levels, risk tolerances, our investment preferences,
Because that still will remain as is now with this committee and the pool will use that
advisory role that we talked about, mentioned before about how to help us shape those thought
processes and taking it forward.
The next level is strategic asset allocation.
Now the government have given us steer.
They would prefer that funds transfer that over to the pool as well.
However, they have given discretion for us to be retained and it is something that I
would advocate that you as the trustees, you know, Quasar trustees of the fund and ultimately
accountable and responsible for the delivery and the fallout if the fund succeeds or doesn't,
you'd want to retain that because normally speaking, if you talk to advisors and everything
else, they'll say the core function really of how you get your returns is making sure
you've got the right asset allocation.
The implementation of that does give a certain level of return, but fundamentally, if you look at who's performed well and not so,
over lead tables, quite often it is linked to asset allocation.
So that can be remained with us.
Now this is where things begin to change.
We're talking about tactical allocation.
So, fairly recently we've had some changes where we decided to exit our UK only strategy
for equity.
We had 20 % of our fund allocated to the UK.
We moved that all onto a global basis.
That is a decision that the committee made and that is deemed to be tactical.
That will no longer be in your gift.
That's a good example to show what will be transitioned in.
So you still have the ability to say equity, but you won't be able to say that geographical bias.
Similarly, and more importantly from my perspective, because I think it fundamentally goes into risk management,
is you will not have the ability to determine whether or not assets are managed on a passive basis or an active basis.
So, you know, all the textbooks, everything else talks around about active risk and how
you can gain or lose from that, but the proposals that the government are putting forward at
the moment is that, in their view, is that this is not risk management.
This isn't, this is all about implementation and this should not be, er, in the gift of
the fund.
You'll notice late, later on down when I'm talking about where we should be prioritising,
myself and not just me, most of London, if not all of London, are fully behind exactly
these comments here and will be writing in their responses, as will Society of London
treasurers, that the active versus passive debate is something where we feel is risk
management and should be retained by the funds.
The underlying other aspects like geographical allocations...
Well, that was what I was going to say, is surely geographical allocation also speaks
to risk, because if you're well -diversified, that's going to reduce your risk.
And if you're all in one particular area or all local, for example, or more local than
you would have been otherwise, that's going to affect risk as well.
It would.
But as you'll see in the report, I'm saying, you know, we can only really focus on a few
key areas.
If we have 32 responses for London, 86 different responses for the LGPS overall, we'll get zero changes made to these proposals.
So what London have agreed as a group is to try to concentrate where the officers and the advice that we've got going forward,
where we think we'll make the most difference.
The majority of people are MSC, it would go for a global, you know, an MSCI type approach.
It's unlikely, very unlikely that Paul would recommend you put it all into one geographical
location.
Bearing in mind that they're going to be FCA regulated, they will do.
So when we're looking around where do we want to focus on, I agree with what you're saying
on that, but it's not a priority because we want to concentrate on some of the, just a
handful of areas and active versus passive has the most difference when we're looking
at those sort of things on that risk basis.
Can I ask a principal question on the actual, I guess, sort of rationale behind the way
we're responding?
Are we assuming that the government can't sort of process more than one idea at once?
I mean, would it not be sensible to do a response that has all of the points that we disagree
with logically laid out and then perhaps we say,
but our top three would be passive versus active
and the other ones that we selected.
It just feels sort of disingenuous to fill in a response,
not putting the things that we think.
The response is broad in line with what you're saying,
but I'm not going to go into any of the detail,
I'm saying X, Y, Z.
We're saying that there are a number of areas,
however, for the purpose of prioritization,
it is active versus passive.
So primarily what you said is what's in there.
We're not articulating it on an underlying basis because we've been given a very, very
strong steer from the government.
They are not for turning, they're not for moving and they are, if we go in on a very
sort of dispersed approach rather than targeting a few key areas, we won't get any changes.
So you say that the government have effectively said if we highlight some of the problems
we won't get some of what we want, which seems to be a very controversial approach.
I mean, you know, that they may well not be foretelling, that's fine, but that doesn't
stop us raising the issues that we've got concerns about.
And as I said, we are raising some of them, but we cannot, there's 30 odd questions, we
cannot say no, no, no, no, no, no, no.
You get, seriously, we've had the Treasury, we've had MC,
we've had Jim McMahon, we've had Emma Reynolds, we've had Rachel Reeves,
all give presentations and harming on the fact is that they've got the call for evidence.
They've spoken to the pools, bearing in mind that the pools have got their approaches and
their views, and their views will be different to ours on this.
Um, and look into doing it.
So what we need to try to, to show, if we really want to, we need a unity in strength.
So London as a whole have, have come together and trying to come up with some things.
And this is what you're seeing here, is that the officers have, have met.
So you've got the, the, there's a group called the Pensions Leaders Group, which comprises
of, uh, Section 151 officers, Deputy 151 officers and pension managers, to say where do we think
the key focal points will be.
And that's one.
There are a few others which I'll come on to later.
I understand that.
But the point is, is if we all said no, no, no, no, no to the whole thing, it would make
clear that we don't really agree with the approach, which is in itself a sort of valid
response to the consultation.
And what they don't want, I mean, it's pretty obvious what they don't want.
They don't want people to be able to say, well, look, you know, out of the 86 administering
authorities, 86 of them said no, no, no, no, no to the consultation.
and they all think it's a rubbish idea because of these reasons.
They want us to kind of say, well, we're not going to say too much,
but we'll get what we want by just focusing on four things,
which I think is a really untransparent
and not a great way of doing a consultation, to be honest.
I think we should be honest about our views
and then prioritize what we think should and shouldn't happen.
Yeah, but like I said, London, we're trying to get a generic thing.
So we are saying that, but, you know, if you're thinking about some of the granular detail,
if we're spelling out everything, what we wanted to do, and this isn't the first iteration
of this, remember.
They had the call for evidence, they've gone round where we've explained all of this before,
and this is what they've come up with, and this is what they're saying.
They've listened to individuals that had meetings with us and with all of them, and this is
what they've said following on from all of those comments, this is now what they're doing,
and then for us to go back to.
So if this was in the first area, I completely agree with what you're saying, but we've already
had that, we've already had all the meetings, and this is now what they're churning out
with and saying this is how they want to seek to do it.
We are raising points about saying, you know, in the return that is much broader than that,
but because there's so many questions, if I couldn't write something in that amount of detail for everything and home in on it,
so if you think about where is the biggest implication that we're going to get,
active versus passive is fundamentally goes into the harm of risk management.
Whether you're UK, US geographical, whether you're going to be value, whether you're going to be growth,
if that is implementation.
I was going to say the only technical, go on.
Go ahead.
Dicker them.
The only technical, like really in detail, hundreds of pages of consultation that I've overseen before is with the local plan
and the national policy planning framework and they have a kind of support, don't support or kind of ambivalence
and then you fill in a box that is empty in which you can fill in lots of detail
And to your point, I mean, if there's a strategic decision,
which is there are deals behind closed doors, which
is what you're kind of getting at,
in which there are the three key areas
that we want to focus on collectively as funds,
and we don't want to stir up too much trouble,
because we've already submitted all the evidence,
and we know which direction wind's blowing.
Would that be an area whereby you could say,
like we said in our evidence giving,
these are our concerns with that,
but we understand direction of travel
as a formula through which you articulate consistency
in the approach that we gave in the evidence part.
Is that, it's kind of a practical question,
like is that how the form works?
Because you know, the different, you know,
we fill in lots of different government consultations
and the forms are often different.
The link on here shows you what the form is.
So the reason it's just a Q and A.
It's just a question you asked to respond.
So that premise of what you said is how I responded
to that particular question.
It's saying that we've got a much broader areas,
However for the purpose of this we're focusing in purely on that.
Because I've already had the conversations with the act...
with the actuary who's advising the government on this.
I've met with the Treasury, I've met with the others.
And the angle where we're looking at is...
and we've been rebuffed in that initial meeting on active versus passive.
We've been rebuffed on that.
But we're still trying to push.
Because we've been rebuffed already in those meetings.
We want to push and try and home in on a particular angle.
And they won't, we're not united when it, across the country on this.
There will be, the pools want to have active versus passive.
And there will be some of the, the larger funds who are in those smaller pools are happy to, for them to run it and do everything else.
So we need to be pragmatic and, and try to understand what is it that's going to make the most difference.
And when you've got issues around, you're not picking your managers, because that's gone anyway.
You're not picking your strategies, because that's going anyway.
You can't leave the pool to go somewhere else because everything must be in your pool
What's the only gift that you can do and that will be having faith that you believe equities are good or bad?
And then you go with the market
Rather than style bias if you've got some concerns, and that's why I'm a homie in saying that's the key one
Because you don't have any other option
This is you know the idea when we come on to governance and talk around later on about oh, you're the owners
so therefore you can have control.
Well, we're not.
We're one of 32.
They're talking about having two representatives on the board
that gives you no control, no oversight.
And when you are an owner and it's your own money,
and there are other strategies where
another big, large business corporate entities will
have a similar style where you get your advice
and implementation done by the same entity,
it's fiduciary management.
And quite a few will end up doing that.
But the difference here is that if you're not
happy with the person who's doing it for you,
you have the ability to leave them and go somewhere else.
None of that is possible for us under any of these proposals.
100 % of all your assets will be in there.
So when we, and this is part of the challenge,
so when we're thinking why I am really homing in,
and there's been articles written in 151,
and a few other sort of journals,
where not just me, but others are homing in and saying,
this is the key one out of everything,
that we want the ability to retain.
It's not to say that we won't go along, that the Apple, even if we don't get it, we can't agree with them.
And going forward, if you've got a good harmonious relationship and it all works well, they want to listen to our views.
And I would imagine the CIF coming here will say, clearly if you want, you know, at the moment we've got 55 % in equity as a benchmark.
If you wanted to do 25, 30, they clearly would listen to us and you would hope that they would follow those lines.
But it's not to say that they would do going forward or if they've got another reason why
they need to do it somewhere different, because there isn't a real strong conflict of interest
policy anywhere for themselves either.
So there's a load of issues that have not been thought through properly.
And so therefore, how can you, when we're looking at giving a response, how can you
make sure that we get the best control that we can?
And governance is another one when I come on to it later on when we're discussing.
There's no mention of it in any of the paper.
They talk about governance on yourselves, support, training or making sure that there's
oversight and controlling this committee and officers what we do.
There's nothing on the pool.
There's no, you know, there's no conflict of interest, there's no dispute resolution
policy about if they're not delivering what we need to do.
We'll talk about ESG in a second around the implementation and how that's going to
operate.
None of that is there.
So there is some... I was going to say whilst Paul logs back in, most of the questions you do,
whilst they're looking for text, you do have to answer fully agree, somewhat agree,
somewhat disagree or fully disagree. That's still there. Not for every question, but for most of the questions.
A point of clarification from me. So we're retaining control of investment objectives.
At least we could decide to have a higher equity investment.
And I can see that at the bottom right -hand corner of the definitions there it talks about
responsible investment.
So we'd have some decisions, for example, about environmental stance and particularly
ethical stance, which our last meeting was very much taken up with.
And I think one can envisage further down the line that there might be something where
There would be a strongly tilted investment offered to us by CIV and a medium ethically
tilted and a lower tilted, for example, is something that might come forward.
But this is at the higher end of what – of the outcome on the fund.
But the actual implementation of this is with the pool.
What's the effect on us as Wandsworth for our schools and our employees in terms of
the contributions that they have to make?
If, for example, we make a choice at this high level that is, for example, very advantageous
and we happen to get it right because we've chosen, do we get the benefit of that?
If, likewise, we make a choice knowingly that it's going to be perhaps less advantageous
if we take a particular ethical stance that shuts us out of some very profitable investments,
does that actually roll through to us and then we have to take a hit on the contributions?
And how is that set off against the tactical asset allocation, for example, which is out
of our hands.
That's highlighted in paragraph 14, where we can see the change in movement.
Obviously any performance, even now, you're making decisions about, you know, and if we
succeed in the way that it's implemented and our returns are greater, it means the contribution
rate will be lower.
And if obviously the reverse effect happens, the contribution rates will go up.
And, you know, a 1 % change in our contribution rate will roughly equate to £2 .9 million
in extra contributions.
But either way, so if they did better than we would have done, you'd save £2 .9 million.
So it goes in both directions.
Right.
But is there any element of sharing this risk and return across the pool?
Is it actually very, very individual to each member of the pool?
It's the same as it is now.
is that they are, you know, the strategy that they will come up with will ultimately be,
at the moment the way it's phrased is it won't be one common strategy.
It will be, you know, each individual, and especially if we're setting our own asset
allocation because that keys crux to some of these movements.
And why I'm saying that is it's essential that we retain that ability to pick and choose
how we do it.
Because if you passed it all over to them, then you may well find yourself with a one that isn't fully aligned to the way that we would like it to be.
But it is the same at the moment. They're not a private company. They're owned by us, the 32 things.
There's no profit to be made from the pool. So there's no risk sharing in the sense of, okay, they will take a cut in their profit.
because there is no profit.
This is a joint venture between all of us.
We're all loaned an equal share as underlying funds sitting
within it.
But the liabilities stay here.
So if it goes wrong, at the moment,
you get to choose exactly to a degree
largely how everything is being delivered.
And you reap the benefits or you pick up the struggles
as a direct result.
Well now, you know, you've got all the liability, but you haven't got the implementation angles
being moved away.
Now there is an argument that, you know, that by having the pools you're going to have individuals
who are appropriately trained, who are fully dedicated to this particular angle, and they
could deliver better performance.
That's what the outcome of this is about.
But that doesn't indicate so far, does it?
No.
No, but this is, obviously the idea is that you have highly professional qualified individuals
who are best placed for managing the fund on a long term basis.
Remember this isn't a 3 to 5 year portfolio, this is a 60, 70, 80 year structure.
So that is the aim of what they're seeking to do.
It is also, there is a big agenda, we'll talk about local later on, about trying to get
money into good investments into infrastructure within the local environment, whatever local
means, to deliver good returns for the community, not just in financial returns but also other
benefits that could come, could be delivered better through this sort of operation than
it would be being quite fragmented.
But to be fair to the Government, you know, if you look at some of the statistics, not
Not for us, but for other funds as well.
The drivers being to get all of the money into the pool, consolidate it, be a lot more
efficient, have much, far fewer number of mandates coming across, so you get economies
of scales, get better returns.
Many funds have not transitioned a load of their assets in, so the government are now
taking this stance and saying, right, OK, all in 2026, underline oversight, whether
it's directly managed or whether it's on a dotted line like I think it will be for a
few more years to come, certainly for those private market assets.
So that's really where it is.
So I'm not as concerned about that because that was the agenda since 2016 when they brought
in the idea of having the manager's selection being done by the pool rather than us.
I mean, if I can just summarize then for a second.
Come back to me, if I may.
But the key decision that we might be able to take this evening is what our stance is
going to be in our response here.
The advice of the officer is that we should take note of the fact that there's a lot of
these that are a foregone conclusion and there's no point making a big objection, but it's
also been put forward by Councillor Caddy that actually we should be saying what we
think.
And so I'd just like to make sure that I understand what the rest of the members of the committee
think about that particular issue whether we'd like to suggest to the
officer that we go for a much more robust rebuttal of these principles even
if we know that they're not going to be accepted or whether we should focus on
things or battles that we think that we can possibly win so so yes counts
counselor gasps and then counselor Dikodem yeah thank you I just had a
I am thinking you are going to fill in this form on behalf of all the London councils
so it is one or each going to fill it in saying the same thing?
So there is two in essence.
Society of London treasurers which is the group that represents all of the section 151
officers is given their own response for which I am part of the group that is helping to
prepare that.
It is not in my name, it is in the Society of London treasurers and I am not the lead
officer on it either. It's David Cook who is a Section 151 officer over at Greenwich.
He is the lead from that. There are several other 151 officers on there. There's myself
as one of the Deccy 151s and there's two of us and then there's three pension managers
that are helping to collate and that's going across to everybody across London for them
to have a common thread about what we're looking to seek to do. What we're saying
know as a group we want to try to make sure that the responses for each underlying fund
are as close as possible to that SLT response to show solidarity, to show that we are all
on the same page, to try and give it the best of our strength to get some change where we
think it is most important. Everyone will have some nuances and they will have some
slightly differing views on certain aspects and some of them won't agree with what we
We'll have a different one because you're not gonna get all 32 agree with everything on those areas
But what we're trying to say is that is to try to make it as strong as possible to home in on those core areas
And focus on that aspects
There are some when it comes around to doing that response on the passive versus active that going it are going a stage further and
Saying they want to have control over whether or not it's ESG fully is G integrated or not and everything else
So there are some that will put more detail in, but they are in the minority.
Most of them will be going along the lines of the sort of the common thread that goes
in.
And we will deviate on certain areas from where it is.
So but in general, on that particular point, we would be saying it's much broader than
active versus passive, but we would be saying that if we're only going to get one change
on it that's the change that we want that's our priority so it is in line
with what Councillor Caddy's saying but without going into detailed granular
elements of you know picking out you know you know saying the difference
between value and growth difference between UK US and global but we are
highlighting it is a broader and we do and we're not happy but if we're only
gonna get one on that particular one it is that active first if passive is is
the crux of our argument.
Yeah, so broadly it's about control, right?
It's about, and that was in
with the previous government as well.
Yeah, yeah.
I guess the bit that, and look,
I can understand the logic behind,
if we're gonna come onto it, the local part,
the impetus behind trying to invest
in infrastructure in this country,
but I still can't quite work out,
and I couldn't work out from this paper,
and you mentioned the two delegates
that then go to the SIF.
Like I can't work out the democratic pathway
through which someone who's in the scheme
of a staff member in Wandsworth,
or a resident who cares about where
the local borrower's pension is going,
what is their democratic process
in which they would be able to influence the pool?
Because we know how they do it with us,
because they come and they lobby us,
and they give deputations.
But if that disappears, I'm not really sure,
you know i'm not really sure
yet you could end up with a kind of black box of
uh... like you said professionals who
on responsible have no
there's no control from the general public of which these pensions are meant
to serve so
that's the bit on that's about because you can centralize control as long as
there's a medium through which
the local
local people can influence the decisions that have been made right
and it seems that that's the bit that is
very weak at the moment
Exactly, and obviously I haven't articulated it particularly well in the report because
I actually have highlighted the same and saying one of our elements is they're talking about
having two shareholder routes on the board.
We already have those already within the SIF.
I'm saying that's far too weak.
It doesn't be for the points that you're highlighting at the moment.
I haven't gone into the granular detail and talking about it being from a scheme member
perspective.
I'm talking about it from being a partner of those 32 partners.
We've got no influence, we've got no say, we've got no direction.
There is no contract management, there is no client relationship scenario where you've
got that ability to challenge and to push back and there's no dispute resolution policy.
None of that's been thought through in this proposal and I have said that in this report
and we are saying that in our return.
And to be fair to Dean, the Chief Executive of the CIF, he's been keen even before this
came around about having much more formalized SLA arrangement, which is what we're talking
about here, but it needs to have bite, it needs to be, if this is all going to be put
in statute, that needs to be put in statute, it needs to be an appropriate dispute resolution
policy so that if for whatever reason we're talking around about the implementation we
don't support, we think it's fully wrong, that we have the ability to somehow get someone
to be able to generally challenge that and there to be some independent review and to
direct change, we can't influence that and the government are clearly saying that we
shouldn't be influencing that.
I can understand why not, because they can't have 32 people pushing in different directions.
But if what they're proposing is fundamentally against that high level that we talked about
at the top of the table and we fundamentally think it is, there has to be a route forward
for us to be able to push back and challenge.
The proposals are silent on that and there isn't anything currently that would enable us to...
Well, there is at the moment enable us to do it because we've got the Complyr explain.
And we've done it twice where we had the situation where for energy transition we went our own way.
We talked about Optipus and Sandbrook.
And then when we had the buy and maintain credit mandate, the bond mandates that we put in.
Again we were able to use something and the Civ...
certainly in the latter one, the civil work well with us.
That showed you a good idea about how we work well together at the moment.
But that's because there is a harmonious relationship.
It hasn't always been like that with personnel changes and everything else.
You don't know what would happen in the future, which is why I'm advocating.
And one of the bullet points you'll see in our responses will focus on and strengthen in that area so that we can really try to ensure that we are protected where we can be.
So I think I'm getting the sense from the meeting is that we have quite a lot of concerns
about where this is going, but it does seem clear as if the mood from government is not
one that's going to allow an awful lot of discussion about this.
Nevertheless, we'd like the officers to put our concerns into the response so that they
stand on the record.
Is that the general point of view of that?
So.
That's one of the points I do need to point out.
Okay.
That was only really the start of where we're at.
There are some key, yeah, you could spend hours on this.
I'll try and be quick on the other thing.
Back to Mr. Chilotti, sorry.
Because you do need to understand there is,
you know, we have strengthened some of our bits
on governance here and, you know, for us, we do have,
you know, we've stress tested ourselves
against the various different codes of practice and the other elements.
I've been focusing in and really trying to advise people the direction of travel we're
going in on training.
This is going to become a legal requirement and the onus on yourselves and what you must
be doing and going on out.
So there will need to be some real robust elements.
We're going to have to appoint an independent individual to sit on the committee, to be
as an advisor who can be looking at doing that. We're going to have to have a designated
senior responsible officer for the fund. We've got it already anyway. I mean I cover all
aspects but not all funds have the admin, the accounts and the investments all sitting
under one so it's not for us. We are going to have to start producing a lot more reporting
elements that will come through on what we're having to do. There's going to be a
biannual review on how well you guys are performing and what you're doing,
whether you are appropriately trained, whether you're actually making the
right decisions, albeit that most of the outcomes of what you want are
actually not going to be done by yourselves. So there are some key
fundamental parts about what we will need to be doing on that. So in essence
There will be a lot more onus on yourselves and a lot more training and a lot more being
able to be able to have evidence that you are the right individual to be on this committee,
but the decisions that make the most difference won't be done by you.
They'll be done by the pool.
Well, except for this decision at the top of the...
At the top.
Which is a pretty weighty decision.
And that's why they're saying that the appropriate list of the individuals that are sat around this table need to be evidenced with it.
So, and the local pension board are certainly required hardwired in around the training requirements and evidence in they have the relevant knowledge and expertise in order to do that.
That is something that is, you know, as members of the committee you need to understand what
you're going to be stress test more as individuals being on this committee than you have been
before.
I mean, I would, yeah.
Just on the, I mean, this is, this is wrongheaded, I think, and I appreciate the government is,
is, is moving in this direction regardless of what we say.
But we only need to meet once every three years under this criteria because we only
do the asset allocation review once every three years.
So we just need a reasonably qualified set of people to turn up for a couple of meetings every three years
You'll tell us how the funds done. We'll look at the asset allocation in the funding level
We'll make the decision or someone will make the decision and then we'll go dormant again because there's literally nothing else to do
Every two months other than that
Who are these people they're going to train up to meet four times a year to discuss?
What decision they'll make every three years just doesn't work doesn't add up
right
I don't have a significant different view from what you're saying.
However, I mean, it isn't just a dump and run for three years scenario.
I mean, we have that thing, you look to others, you hit them on the headcount, there is that
onus you need to monitor and to ensure that change is made.
Because whilst there might be an asset allocation review every three years, we know when you
have other key moments, whether it be a COVID type scenario, whether it be a Brexit type
scenario, there will always be key factors where again you would have those fundamental
points where you need to come in and do something differently.
There's also times of change when you see the movements wanting to go differently.
You will be potentially looking to keep on update on ESG deliveries, deliverables and
how well we're performing on other aspects.
So the bite that you will have and the ability to influence change rapidly like you have
now is gone.
Rapidly in the sense of, compared to what it will be going forward.
But the idea that you will be doing nothing in the interim period I don't think is right.
However, it's going to be much more engagement with the pool.
And one of the questions, I know Silvie's in the back, but they'll be here later on
on a more formal setting in the closed session.
And they'll be looking about how they will be proposing to address some of those concerns.
You may wish to ask of Silvie and Rob when they're in this session a bit later.
But I think yes, I mean it will be more of a client contract management type role
Liaison with the pool about what they're doing how they're doing it how they're meeting that high level objective
But there will be limited stuff. We're not you know, you're not going to be looking at changing our asset allocation
Review regularly, so you're not gonna be looking at moving not be deal with any issue transition out and moving that stuff
That won't be happening
Yes, the cancer cancer cancer dick limb
Just to re -emphasise, we will be monitoring, but if we are not happy there is absolutely
nothing we can do.
At the moment, because there is no other element of the governance around how we size that
up, that is not to say the CIV would not implement their own and have that process going forward.
I would be surprised if Dean and the team don't have a way for us to engage properly
with them because that's not in the nature of them and certainly the way that we're working
together at the moment.
I think it will be collaborative.
But if we're looking to try and put parameters in place, who's responsible for what, we should
be saying this consultation, there's a gap here, we need that strength to give us that
should they not be willing to listen.
In your professional opinion, what weighting of this is based on the attempt to try and
direct funds towards more domestic infrastructure and the growth agenda and what weighting of
it is around curbing the ability of local authorities to make ESG decisions that are
out of, you know, that are complicated or, you know, political, because, you know, we
saw with the previous government, the boycott bill, there was a particular attempt to stop
Divestment we know that loads of councils had to go through tricky meetings
We went through one but I think we handled it
well, like what what waiting do you think is I mean is it is that not a question because
Is it to create a single body that would then have to face that kind of pressure, but there's no mechanism. So
like
It's hard for me to that, you know, I you know, it's
In some ways I should be able to find out but it's it's it's very difficult to work out like what?
the direct impetus is other than central governments obvious desire to have more
control over things and wider efficiencies but those are the two
areas in which pensions have had a political element in local government
right I can give a personal view rather than it being from the ones of fun per
se from having you know been in inside meetings with ministers and with
Treasury and other civil servants I don't think it's there to try to steer
on the direction on ESG or on any humanitarian policies.
Generally, that conversation has never cropped up.
Directing and forcing people to have it all under one umbrella, so rather than having,
say in London, three, four hundred mandates, consolidating that down, so there's greater
control and efficiency.
Yes, I think that is the benefit of what they're seeking to try to do.
But I also feel as though there is the idea that it's easier to control 8 than it is 86,
and when all the money's sat with 8, to give a steer that they expect to have more money
directed towards the UK investment, then I think both the previous and the current government
– and when I met with – and I had presentations from both responsible ministers, they were
saying the same, that it's – if you're not going to do this, you need to realise
that the fund is there to support more than just necessarily the return here.
And you can get some good investments by investing in the UK, and I think that there is, by doing
this, they're able to direct it easier than if there's 86.
Two questions, probably the first one is easier to answer and more straightforward.
If we have liquid assets, is there any flexibility on when we need to transfer them?
Are we able to negotiate with them in terms of when we can move it or get it out?
94 % of our liquid assets are already invested with the SIF.
So the only investment that we have, and that's part of the reason we're already gearing up,
so we were very compliant and we've always worked well in the approach.
And that's why I said we moved the buy and maintain bonds, that took us to the 94.
We weren't, you know, because we said no originally and the SIF compromised and it worked for
wasn't optimum but there needs to be compromise on both.
But all we've got left is Oakhill, which is our multi -asset credit.
We won't be able to pick multi -asset credit going forward because you would have seen if you look onto the link there was only eight buckets of credit in general
that would be going in under one umbrella rather than it being private debt and multi -asset credit separately.
But I would, but the reason why that's outside is that at the moment CQS which is the other predominantly European house, an Oak Hill or a US house.
So therefore it compliments one another.
But in essence, longer term in essence, no everything must be under the management.
and I use that term it doesn't mean that they will be transferred into because
we've got a lot of legacy private market funds that would be very complicated to
transfer you know by 2026 under it so the conversations that we've had with
the SIV on a very pragmatic basis that well I have to have under these
provisions oversight and the ability if they thought fit to sell on secondary
market but they wouldn't be expecting us to sell it all and then move it in as of
2026 but as of liquid for us I'm hoping that we can find a solution for Oak Hill
and to come and in which case it will be a moot point because we'd have had
everything and even now it's low risk because it's 94 % with them already.
The second question is about this local investment because I personally think
I think it's a terrible idea.
You know, the point of a pension scheme is to support its members and to provide an income
for people who pay into that pension scheme.
It's not to support local and sort of national infrastructure, in my view.
Is there any sort of requirement or need for this Committee to take a view on that, or
is that something that's going to be just sort of done by the government, and, you know,
is there any point in me sort of raising my concerns?
I think there is a point, and again in the paper I agree with you, as does most of London.
It is not on, we're not using the exact argument that you're phrasing it as, but there's clearly,
there's no direction to say a minimum of X must be in the UK, but they are expecting
each funds to have a target for local elements, but it's not mandated.
But we're even saying that for the London pool it's very, very challenging.
If you're in something like Brunel or your borders to coast or your access, your regional
landscape is broad.
So local for that pool is vast.
For London it's very concentrated.
So I think we need, Wales have been given a discretion for some of the stuff, London
needs to be at the very minimum given a discretion on what local means.
But we're pushing for local to be UK.
And there's no pre -mandated target on where it is.
So we're focusing on that, saying, because you're not going to be told you have to have
10 % in it. But even UK, I mean there's a whole world of investments out there and
surely the duty of a manager of a pension scheme is to select the best
choice of assets to invest in that will give the best returns for that scheme
given the objectives rather than what's going to support the national
infrastructure. That's clearly the most efficient way to invest I would have
thought, I don't know. Isn't that precisely what's happened in Canada that we've noticed that Canadians are
investing in here because they've consolidated their pension fund, is that correct?
I'll just make a couple of comments.
I completely agree with the point about local that it should be defined as UK, but crucially
it's just a target that you can choose to set.
So under that mandate you would not be required to invest in the UK, you would only invest
in the UK if you could find investment opportunities that met your objectives and the risk we
term requirements. So I think that basically the previous pooling consultation which had
this, so have an ambition, I mean, have an ambition and UK, local can be UK or local
up to you, I think that's a far better approach that enables you to still discharge your fiduciary
duty. And on Canada...
When you say you...
No, no, no, the consultation's clear that they're saying the committee would set, you
And that could be zero, I think, in theory.
Is it from the one of us that set our own?
Yes, that's my interpretation.
If you look at paragraph 27, if you go to that, these are the four areas.
And we're talking about local, so this is where it picks up.
So there's four bullet points, and where I'm saying about the focal point
of where we are seeking to have the core main change.
And it recognizes that the government has a desire to increase local investment.
That's all it is, it's a desire, it's an implementation,
It's not mandating anything.
So I'm not massively concerned.
However, what we are saying is if they do want to prescribe something, we know we're
setting the landscape for future direction.
So for that reason, that's why we're saying therefore the group want to encourage investment
in London.
Whilst it might be a preferred option, for us, local should be continue to be determined
to be the UK.
Because clearly, if you are going to have any investment, and it was going to be round
here that's going to ensure that there's more affordable houses being built then clearly
it would be advantageous if the investment was sound and it was local to our local area
then clearly we would all want that but we know that's unlikely that that's going to
happen so we need that remit to be much broader and that's.
It sounds like we are going to have this debate but not yet for this committee so there's
probably not a huge point.
Exactly so it's not mandated it's in there we are going to have to set some agenda and
that is would be predetermined by yourselves as a group as to what you
wanted it could be zero you know and then if you're having that then no
doubt you may get some challenge as to why it's so you have to articulate why
we are going to be encouraged to work with where you got local mayors and stuff
like that work with them and we'll be needing to work the GLA one of the
things that we're not to be talked about here but be much broader we've got the
largest local government fund in London is not actually part of the pool you've
got the LPFA, you know, who are separate from that, who are in LPP, so what sort of collaboration
are we going to do?
If we were to do things locally, then surely it would be more in collaboration with others.
So on that aspect, again, that reiterates my point about why local should be UK, and
I think as a group of London officers, we're supportive of that.
So I'm unconscious of time and everything else, and so if you look at where we're focused
So we talked about the active versus passive, mainly being the core one.
But in saying that the other areas we've talked about, you know, timelines, what you mentioned
Councillor Caddy about the liquid stuff, that's not as much of a concern.
It's more the private market mandates where in reality you're not going to be able to
have those transferred under direct control.
but there are pragmatic ways of delivering that and we just need the
government to recognize that and work in collaboration whereby there might be a
management oversight on how they're operated rather than those assets
physically transferring in under the name of of the sieve and to be fair the
sieve are agree fully that I mean obviously got Robin Sylvia who you can
ask them some questions that later as well when they're sat here but they
will tell you the same as well it's working closely together and then the
final point which we talked about with Councillor Ditkow them if you look at so
the questions 27 and 28 is on some of the elements of governance but it's so
weak it's only talking about the two members which we currently have when it
needs to have that you know the much stronger contract management arrangements
where there are proper formal processes to enforce that change if the pool is
in the bear of mind the pool is the only vehicle that we have to manage over 3 billion pounds
worth of our assets.
So like I said, I'm genuinely saying that I don't think at the moment the way that the
group that there is within the pool themselves that we would find ourselves in a situation
where we are at loggerheads and we couldn't get a resolution.
We've seen the evidence of that already with the buyer maintained.
However, we want to protect for the future and we want to make sure that if we are now
going to not have the ability to do the comply or explain, because we have lost that, we
must have some element of control and some element of comfort that there is a dispute
resolution.
That's not to say we get our own way, but there has to be, if we're at locker heads,
that someone independent looks at it and finds a resolution rather than just being told,
you know, suck it and take it, which is what it is currently phrased, not in those words,
but that's what we'll be faced with because we have no other alternative.
Thank you for that couple of points. For me, the easiest solution to that last one would
be just create a market between the pools, allow us to transfer out. Rather, if you're
going to incentivize managers to do a good job, you could have checks and balances and
sorts of complicated institutional arrangements, or you can just say, as a body we could skip
into a different pool if our local pool lets us down, we'll move to another one. It means
they don't have to create a lot of complicated institutional solutions, but they're not going
to do that, I appreciate it. Question eight, should that be insufficient on that first
sentence there? There's concern the pools will have sufficient capacity. Is that insufficient?
And on that point, is the CIF getting more money so they can manage this influx of capital
and complicated things they're going to have to manage?
Any money that they get will be from the 32 funds.
There have been some questions that have been raised and the 61151 officer at Bromley is
very vocal on this particular point and it will be very aligned with Mr Turner.
He's raised it directly with the Treasury and ministers when I've been at meetings as well and never really got a response.
So they no doubt will be coming with a business plan to suggest how, for what they're being asked to do they need more resource.
I don't think anyone of us would want them to try and deliver what they're being asked to do with their current...
And these are tight timelines in local government land, like...
They are. And that's why I said about when we talk about the transition about what comes
across, it will be pragmatic, I hope. Currently the proposals that have been laid out by the
SIV are sensible and you know, we don't know what the final, what it's going to actually
look like. This is still part of the process of coming back with some formal guidance.
But March 2026, they will not have 100 % of assets directly managed by them. There will
be this oversight arrangement even for the liquids. I mean we're in a very
strong position as most of ours are with the mill elsewhere many funds don't and
I you know I can't speak for the CIF but I you know but they have when it
outlined what we're looking at doing it is doing a smooth transition across with
oversight being fundamental rather than necessarily direct ownership sitting
under that umbrella of it sits in one of their funds because that can't be done
15 months.

5 Quarterly Investment Performance Report - 2024/25 Q2 (Paper No 24/405)

Yes, so I mean, this is the quarterly paper.
I'm not going to really talk about it too much in the sense of that it's opened up really,
really straight to questions.
And I would say that we, just to note that the London CIF have got their own presentation
on some of this when we're into the closed session, so you may well wish to reserve some
of your questions till later on when they're able to give you honest and open, frank conversations
that you, that, you know, which might have some commercial sensitivity to them, which
is why they can't be discussed in this forum, but they can be discussed later on on the
agenda when they've got their own presentation from them.
But if you've got any questions from yourself or from Tony in relation to how the market
is in general, then this is probably the time to ask on this paper.
Item 6, general matters.
Mr. Gelotti. Okay so as per normal we'll you know if it's okay with yourself

6 General Matters (Paper No 24/406)

chair we'll go through each sort of paragraph one by one because they are
sort of like unique different little entities. So we start off with what we've
just been roughly talking around about the fit for the future consultation
which we've had a lengthy discussion on. Part of that is that we would have to
move the various different assets into the SIV.
So what you can see above really now is on paragraph three, it shows you the level of
investments that are currently invested within the pool.
And as I mentioned before, we've got roughly 94 % of our liquid assets that are sitting
inside.
The challenge we've got more with the liquids is we have some of our direct and closed and
the directly and evergreen type solutions and that is really JP Morgan.
So the JP Morgan if you recall is an infrastructure mandate that doesn't have an end date whenever
assets are sold or they're recycled.
So there's no natural end date.
More often than not, when it comes to the private markets, there is a finite period
of time.
So naturally, as those monies would come back out to us, any new money would normally be
now under current arrangements would be going into a SIV -based product.
But we will have some challenges around how we overcome some of those direct -me managers
that are evergreened.
But we'll be working with the SIV during the next sort of 12 to 15 months before the March
26.
deadline date comes across as to how those will be addressed.
So I don't know whether or not anyone has any queries on that particular part of the
paper.
Just a quick question on the math, so if I can understand it, looking at that paragraph
3, is it 94 percent?
It's 94 percent of liquid assets.
Oh, of the liquid assets.
So the only, as I said, the only that are either directly managed by the pool or sit
in our passive which is overseen by the pool.
So the LGM mandate, our passive mandate,
isn't a directly a sieve product,
but it meets and fulfills the pooled requirements
because they have oversight of it.
So the only one which wouldn't meet the requirements
is the Oak Hill mandate that sits within our MAC allocation.
Just in paragraph 6 it notes about staff turnover and that the CIF doesn't have a Chief Investment Officer at the moment.
So is that still the situation? Is that a concern? Are they recruiting desperately?
That might be a question you asked them when they were at the meeting later.
Good, yes.
So the next update is on our Newveen Property Fund.
You will recall that we've had lengthy discussions over the options available for this fund.
It's a very small fund for which we own in excess of 30 % of the underlying assets within
it and obviously it's looking to go into wind down.
We're asked to find an alternative option and that would be concluded buyout.
So there has been ongoing discussions with several third parties to come up with a preferred
bidder for it which has been chosen.
The problem that we have is like with many things
when you're trying to value a property based solution
that two different values will come up
with two different valuations.
And that's what we've found ourselves in
the position at the moment is that the Nevine's valuers
are varying at x and the preferred bidder
is coming in at Y and that difference is not within tolerance levels at the
moment so we are obviously having an ongoing discussion so they've extended
the period of time for which the fund is held in abeyance and we need to look at
what our options will be. The problem we have with all of these again doesn't
tie in with the central government's agenda and you know what is it that we
want to try and seek to do, how do we operate, if we can't agree, do we then revert back
to wind down or do we accept that actually the value that we had it priced into our fund
was too high and it wasn't the real value.
They're the options that we're looking to try to do.
So there are two other LGPS funds that are in this particular mandate that I'll be
the A's in with, one of whom is actually another pool.
So we will be looking and I will be engaging with those and bearing in mind that the other
pool has, shall we say, property experts who can advise appropriately.
So we've got some good, able to have some, you know, good soundboard where we'll try
to come up with the right outcome.
The problem with all of these is these decisions are made not unless four days where you meet
as a committee so it's ensuring that I keep you abreast and I had delegation up until
the last decisions but we thought we'd be in a position to sign off, we're not, so I
need to have that delegation extended.
When is the kind of final cut off line where we have to decide whether we're going to cut
our losses or?
Realistically it should be before next committee, I think we've got another one coming in this
month where they'll be looking to see whether or not they can come to a compromise.
Like with most of these things there's always two sides to the equation.
Even with these tolerance levels and coming up with a median price it means that the stakeholders
of the other entity are going to potentially pay an inflated price to what their own value
of things is worth.
So it's not just us, it's them as well.
are they willing to pay more than what they think they deem it to be. But even
with even if we don't go ahead with this it's not the end of the matter because
we then have to go into wind down and gradually those in underlying assets
would be sold and they'll be sold at a time when everyone knows that you need
to sell because you're in wind down are you really going to achieve the optimum
value and no one's got a crystal ball so that's the dilemma that we're we're
looking at. In reality though, we are the largest owner of that fund. Our investment
is small in comparison to the fund value. We are looking at about £40 million investment
for the £3 .2 billion fund. If we do end up losing 10%, it's been overpriced, it's
£4 million in that wider scheme. So clearly we are going to advocate and push for the
not material.
Thank you.
We've discussed in the past about climate reporting and I know there's a bit of training
that was going on about options and about direction on it, so I don't know whether or
not there was any questions you wanted to raise on climate reporting in this session.
We don't have an answer yet to what it is looking like but I wondered whether we might
do in time for 13 February which is the next Environment Committee meeting.
On what, sorry?
So it says, a set of progress.
Am I right?
So officers are working to compare the reports and check this.
We can still provide the information.
When do we think we might have that accurate information?
Sorry, I mean, what we're looking at, this isn't something that we marry off.
We're looking to do every three years.
we're looking to do we were going to do in line with our asset allocation do a full review.
We have got some new data where we've asked the SIV to provide for us.
Now the SIV use different metric and do use a different provider so that of what MRSA
has done.
So if on the long term projection bearing in mind what we talked about who's going to
be responsible for what going forward we might need to rebase some of our stuff and looking
at to what the SIV can potentially provide for us that's not something that's not going
be done by February. This is something that needs to be a proper measured approach around
about how we look to go in the future direction of what we're seeking to try to do. And there
could well be other metrics that we may want to consider going forward, as was discussed
in the training session around other options about what we could be looking to liaise with
the CIV to take it forward.
Then on the update on responsible investments, obviously at the last meeting we had the petition
and we looked around what could we do and how best placed could we look to try to look
around our humanitarian approach to investing and having a much more responsible investment
strategy.
Now we talked about potentially having certain options at some point could come back because
at that stage when we did it you still had the option of comply or explain.
You have now seen in the paper today that that is gone.
So the only option that we are going to have going forward is finding the right strategy
cutting across London.
So it is not going to be pragmatic to realistically bring anything back here until we know the
outcome of the consultation and then can work across our London peers to provide various
options as a group.
We can then bring those options back to it.
But I'm afraid us being ones with the loan is no longer viable because you won't have
the Complyor Explain option available to you.
I think the point then is we need to note the updates provided in this report and specifically
we should delegate authority to Mr. Josh in the Director of Financial Services to vote
on the nouveen UK PF merger if a vote is required before the next meeting of this
committee and we all agreed thank you very much and so item 7 communications
policy review okay this could be really nice and brief hopefully it is here for

7 Communications Policy Review (Paper No 24/407)

review like anything we should be you know looking at our policies and
updating them as appropriate on a regular basis that's normally done
within every three years. The officers responsible for the administration of the scheme have
re -looked at the policy, considered it, and there were only a few minor changes needed
to be updated to reflect changes in designations. It was deemed that the overall policy was
fit for purpose, so it's laid here before you for approval on that basis.
Are we all agreed?
Thank you.
Item 8, we need now to move to excluding the press and public for any members of the public
who may be watching.

8 Exclusion of the Press and Public

This is very normal when we are asking fund managers to present to us that they can do
so in privacy because some of the matters may be commercially sensitive, and therefore
We are asking the committee to agree to pass a resolution as follows, to decide having
regard to the particular nature of the business to be transacted, whether or not to exclude
the press and public during consideration of item 9 on the grounds that they are likely
to disclose exempt information by virtue of paragraph 3 of part 1 of schedule 12a as amended
of the Local Government Act 1972.
Are we agreed on that one?
Thank you very much.
Thank you.