Pensions Partnership Ltd Manager Day June 2018 Purpose of today - - PowerPoint PPT Presentation

Border to Coast Pensions Partnership Ltd

Manager Day June 2018

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Purpose of today

• 1. To update you on progress at Border to Coast
• 2. To outline the timing and details of the first Sub-

Fund launches

• 3. To set out our approach to manager selection

and what you should expect

• 4. To answer your questions

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Border to Coast Pensions Partnership

12 Likeminded Local Government Pension Funds

• c. £50bn Assets Under Management

Internal & External Management

Border to Coast: the story so far

Phase 3: transition to permanent team and building Border to Coast Phase 2: Govt approval, funds’ commitment and building blocks established by project team Phase 1: establishing pool and guiding principles

Jan 2015 – July 2016 July 2016 – Dec 2017 Dec 2017

Guiding principles

1. Meet Government aims (governance, RI, VFM and infrastructure) 2. One Fund, One Vote 3. Funds retain governance role and ownership of asset allocation 4. Generate improved net of fees risk adjusted performance 5. Internal management capability 6. Improved resilience and capacity over existing structures 7. Shared team in one location (Leeds)

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Border to Coast: Why Are We Here?

Making a difference to investment

• utcomes for Local Government Pension

Funds through pooling to create a stronger voice; working in partnership to deliver cost effective, innovative, and responsible investment now and into the future; thereby enabling great, sustainable performance.

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• a collegiate organisation: working

together in an open and trusting environment with shared vision and goals to deliver long-term, strong and sustainable outcomes for customers;

• a sustainable organisation: investing in
• ur colleagues by facilitating work-life

balance; by encouraging personal and professional development; and supporting a creative, flexible and open to change culture that is equipped to evolve new capabilities as customer needs change;

• a transparent organisation: maintaining

customer and public trust in Border to Coast’s integrity to enable us to deliver

• ur objectives.

Customer

• wned,

Customer focussed Collegiate Sustainable Transparent

Border to Coast: What Do We Want To Be?

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Border to Coast: progress in 2018

Milestones achieved

• FCA authorisation (FRN 800511) and ACS approval (PRN 807336

– QIS suitable for professional customers only) in place

• Board and senior management team appointed
• New office established – Toronto Square, Leeds
• TUPE integration of internal teams under way
• Transition and Manager Selection Advisers appointed

Next steps in 2018

• First internally managed Funds to launch in July
• First externally managed Funds to launch in October
• Private markets structure planned for Q4 2018

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Border to Coast: Board

Chris Hitchen Enid Rowlands Tanya Castell

Chairman Non-Executive Director Non-Executive Director

Rachel Elwell Fiona Miller

Chief Executive Chief Operating Officer

Border to Coast Pensions Partnership Ltd

Investment Team John Harrison

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Creating our new Investment Team Build on what was there already

• Experienced investment professionals
• Broad range of asset classes
• Strong track record for internal capabilities
• Consistent approach and long term perspective

Future opportunities

• Larger team with greater research capability
• Additional focus on external manager capabilities
• Enhanced risk disciplines and awareness

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Investment Team structure – end 2018

CIO Head of Equities and Alternatives Portfolio Managers Equities (7) Alternatives (4) Head of Strategy and Fixed Income Portfolio Managers (2) Head of External Management Portfolio Managers (4) Head of Research Head of RI Economist Research Managers (2) Portfolio Risk Manager

Assistant Portfolio Managers (4) Research Analysts (4)

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INDICATIVE Potential Development of Sub-Funds*

= Potential external manager mandates

* Subject to Partner Fund requirements

Border to Coast Pensions Partnership Ltd

Externally Managed Funds Graham Long

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Existing Active UK Equity mandates

• Seven mandates - all use FTSE

All Share benchmark

• Five mandates with net of

fees performance targets between 1.75% and 2.25% pa – closely aligned with Border to Coast Sub-Fund

• Two outliers – one lower risk

and one higher risk

End Mar 2017

Mandates Target vs index Size

Cumbria One +1% pa £241m North Yorkshire One +3% pa £304m Surrey Two +2% pa +2.5% pa £684m Tyne & Wear Two +2.5% pa +4% pa £632m Warwick- shire One +2% pa £283m Total £2.1bn

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UK Listed Equity Alpha Fund

Starting AUM: £0.8bn – £1.2bn (est)

subject to Partner Fund asset allocation decisions

Manager numbers: 3 Benchmark: FTSE All Share Index Performance Target: +2% pa rolling 3 years (net of manager fees) Risk: 2% to 5% tracking error

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Existing Active Global Equity mandates

• 18 mandates; 17 managers
• Broad range of benchmarks

– some blended reflecting range of manager benchmarks

• Two use inflation plus

benchmarks

• Outperformance targets

between +1% and 4% pa; higher for inflation plus

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Our Objectives

• Long term net of fees
• utperformance
• Blend that improves

risk adjusted returns

• Long term

partnerships; success is not having to change managers

• Integration of RI
• Restricted opportunity

set – no consultant ‘buy’ lists

• Over diversification;

blends that reduce risk adjusted returns

• Frequent (costly)

manager changes

• Higher overall costs than

before pooling

We want to achieve We want to avoid

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Responsible Investment

• Sustainability at core of
• ur corporate and

investment culture

• Effective stewardship

drives better returns

• We will exercise voting
• n internal and external

mandates

• Evidence of ESG

integration

• Active engagement
• Quarterly reporting
• UK Stewardship Code,

UN PRI or international equivalent

Why it matters to us We need from you

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Selection Process

• Transparent, open

and fair

• OJEU principles

compliant

• Three categories for

scoring

• Technical/quality –

assessing each manager

• Complementarity –

assessing manager combinations

• Value for money

Complementarity in practice*

Manager Weight (%) Return (% pa) Info ratio A 30 9.9 0.9 B 50 8.3 0.4 C 20 11.6 1.0 Total 1.0

* Based on sample manager combination (Mercer)

Border to Coast Pensions Partnership Ltd

Alternatives Mark Lyon

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Key Aims of Structure

ECONOMIES OF SCALE OPERATIONAL SIMPLICITY FLEXIBILITY ADAPTABILITY INCORPORATE LEGACY ASSETS COST EFFICIENCY

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Types of investments Relationships with Managers We are looking for

Co-investments Managed Accounts Traditional GP/LP Club Deals/JVs Partnerships Transparency New opportunities Knowledge Transfer

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Investment process

Investment Allocation

Partner Funds

Investment Selection

Border to Coast

• Strategic asset allocation

remains with Partner Funds

Due Diligence

Border to Coast

• Investment selection

and portfolio structure determined by Border to Coast

Border to Coast Pensions Partnership Ltd

Rachel Elwell

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Disclaimer

The material in this presentation has been prepared by Border to Coast Pensions Partnership Limited (“Border to Coast”) and is current as at the date of this presentation. This information is given in summary form and does not purport to be complete. Information in this presentation, including any forecast financial information, should not be considered as advice or a recommendation to investors or potential investors in relation to holding, purchasing or selling securities or other financial products or instruments and does not take into account your particular investment objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information having regard to these matters, any relevant offer document and in particular, you should seek independent financial advice. All securities and financial product or instrument transactions involve risks, which include (among others) the risk of adverse or unanticipated market, financial or political developments and, in international transactions, currency risk. This presentation may contain forward looking statements including statements regarding our intent, belief or current expectations with respect to Border to Coast’s businesses and

• perations, market conditions, results of operation and financial condition, capital adequacy, specific provisions and

risk management practices. Readers are cautioned not to place undue reliance on these forward looking statements. Border to Coast does not undertake any obligation to publicly release the result of any revisions to these forward looking statements to reflect events or circumstances after the date hereof to reflect the occurrence of unanticipated

• events. While due care has been used in the preparation of any forecast information, actual results may vary in a

materially positive or negative manner. Forecasts and hypothetical examples are subject to uncertainty and contingencies outside Border to Coast’s control. Past performance is not a reliable indication of future performance. The information in this presentation is provided “as is” and “as available” and is used at the recipients own risk. To the fullest extent available by law, Border to Coast accepts no liability (including tort, strict liability or otherwise) for any loss or damage arising from any use of, or reliance on, any information provided in this presentation howsoever caused.” Suitable for professional clients only; regulated by the FCA (FRN 800511)