LGPS CENTRAL Ltd. PROGRESS UPDATE Joanne Segars Chair, LGPS Central Ltd. June 29th 2018 LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Floor 5 Mander House, Wolverhampton, WV1 3NB.
ACHIEVEMENTS TO DATE • FCA approval Benefits of • Authorised Contractual Scheme approval scale (at least £25bn in • Went “Live” on 3 rd April 2018 assets) • £5.5bn ACS under management • £6.5bn Segregated funds under management LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Floor 5 Mander House, Wolverhampton, WV1 3NB. 2
RECRUITMENT UPDATE • 43 roles filled • Staff target of 65 • Head of HR & Business Services has now started • Currently recruiting Investment Director, Equities LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Floor 5 Mander House, Wolverhampton, WV1 3NB. 3
LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Floor 5 Mander House, Wolverhampton, WV1 3NB.
INVESTMENT UPDATE • Work on product development, in close collaboration with our Partner Funds, continues • Emphasis on cost reduction, investment performance and responsible investment & engagement • Monthly client reporting is operational • Planned expansion of investment team is scheduled with the recruitment of Senior Portfolio Managers LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Floor 5 Mander House, Wolverhampton, WV1 3NB.
ENGAGEMENT • Engagement activity between LGPS Ltd, Partner Funds and Stakeholders is a high priority • Both traditional and digital forms of engagement will be used to improve communications • The Company is taking a collaborative approach to working with Partner Funds and Stakeholders • Exercise is currently underway to listen to groups and individuals and learn how the Company can best engage on both a one-to-one and collective basis LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Floor 5 Mander House, Wolverhampton, WV1 3NB.
KEY DELIVERABLES 2018/19 • Delivery within budget • Design and delivery of cost saving model • Design and delivery of investment performance monitoring model • Delivery of the Company’s Responsible Investment & Engagement Policy • Completion of Target Organisational Structure • Completion of Target Operating Model • Creation of Client Servicing and Shareholder Engagement Plans • Product Development and Delivery plans for 18/ 19 and 20/ 21 • Design and delivery of the Compliance Framework, Compliance Monitoring Plan, Risk Framework and Risk Monitoring Suite • Design and Delivery of Company Handbook LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Floor 5 Mander House, Wolverhampton, WV1 3NB.
LGPS CENTRAL POOL PRODUCT DEVELOPMENT AND ASSET TRANSITION PLAN Rachel Brothwood Director of Pensions, WMPF Joanne Segars Chair, LGPS Central Ltd June 29th 2018
GOVERNMENT CRITERIA 1 2 3 4 Benefits of Strong Reduced An improved scale (at least governance costs and capacity and £25bn in and decision excellent capability to assets) making value for invest in money infrastructure “…all Funds must fully participate in a pool..” “...all pools must have an FCA authorised operator…” “…with minimal exceptions where there is a value for money case, …[funds] must delegate manager selection to the operator…” Marcus Jones MP, former Minister for Local Government, letter of August ‘17 PRODUCT DEVELOPMENT AND ASSET TRANSITION PLAN 2
REGULATORY BUSINESS PLAN • Phased launch of ACS sub-funds • Other collective investment vehicles where ACS not viable • Advice and expertise, assisting Partner Fund management of assets ahead of transition • Projected aggregate savings in excess of £250 million over 16 years In partnership with the Company, LGPS Central Ltd, providing solutions to enhance implementation of investment strategy, at reduced cost PRODUCT DEVELOPMENT AND ASSET TRANSITION PLAN 3
SUB-FUND & SERVICE CRITERIA • Meeting Funds’ strategic asset allocation needs • Significant scope of cost savings • Substantial scale (AUM) • Resources and systems in place • Clarity on vehicle structure essential to to enable delivery • Robust value for money “test” • Efficient delivery, potentially in partnership or cross-pool Developing the right products and the commitment of Partner Fund assets are critical to delivery of the projected savings PRODUCT DEVELOPMENT AND ASSET TRANSITION PLAN 4
OUTLOOK FOR FUND LAUNCH Anticipated pipeline for 2018/19 LGPS Central Sub-Fund Participation (potential) West LGPSC Sub-Fund Internal/ ACS/Alt Derby Cheshire Leics Notts Shrop Staffs Worcs WMITA Mids external Structure Global equities E ACS Emerging market E ACS equities Corporate bonds E ACS UK internal active I ACS equities Global internal I ACS active equities Private equity I/E Alt Factor-based I ACS equity fund • Outcome of “recalibration” and more detailed planning for launch • Other sub-funds in development pipeline including multi-asset credit and infrastructure fund • Investment through ACS, projected to increase over £13bn during first year PRODUCT DEVELOPMENT AND ASSET TRANSITION PLAN 5
PRODUCT DEVELOPMENT CYCLE Investment Committee ideas Partner Head of Fund Client ideas Services Practitioners Product Advisory delivery Forum Product Development Plan PRODUCT DEVELOPMENT AND ASSET TRANSITION PLAN 6
IMPLEMENTATION LGPS Central Sub-Fund Launch Timeline Legal, FCA and Procurement for Product Delivery Product Planning Operational Readiness External Mandates • Legal work • Final & prospectus • Sub-fund • PFs & mandate development information LGPSC agreed • FCA approval days identify • PQQ & ITT process • Custody strategic • Due diligence on • Preparations for transition needs for a shortlisted arrangements new sub-fund providers launch with ACS Sub- Procure- & paperwork • Product design • PAF-dedicated provider Planning Delivery fund • Commitment • Resource ment liaison groups • Close out final issues to AUM planning • Providers selected with PFs • PF resource • Business • Pricing structures • Assessment of costs and case agreed with PFs • Committee engagement • Costs & • Outcomes approvals • Sub-fund savings presented • Transition launch to PFs manager appointment 2-3 months 1-2 months 1-2 months 3-5 months Timeline for sub-fund launches – internal ACS approx. 4 months, external ACS and alternative structures 8 months + PRODUCT DEVELOPMENT AND ASSET TRANSITION PLAN 7
SUMMARY • Collaborative approach to development • Focused on delivery of cost savings, prioritised to meet fund requirements • Work ongoing to develop vehicle structure and mandates - plan will continue to evolve • Pace of development and scale of commitments will impact realised cost savings • Requires all parties to dedicate time and resources to enable successful development and launch • Support through discretionary and advisory management agreements available in the interim LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB PRODUCT DEVELOPMENT AND ASSET TRANSITION PLAN 8
g y Central Pool Joint Committee - Training Day The Future of the LGPS The Local Government Pension Scheme Everything you need to know! Bob Holloway Pensions Secretary Scheme Advisory Board
The Agenda………………….. Pooling Setting the scene Austerity and Brexit 2016 valuation Cost Control Investment regulations MIFID II Cost Transparency Data Quality SAB workstreams Questions
Pooling
Pooling • Why? • Rationale? • Aspiration • Methodology • Who does what • Timeframe • Break-even • Infrastructure • Life after transition
Facts about the scheme Scheme expenditure - £11.8 billion Expenditure on benefits - £9.5 billion Total scheme income - £14.7 billion Employer contributions - £7.4 billion (50%) Employee contributions - £2.1 billion (14%) Investment income, etc - £5.2 billion (27%) Market value of funds - £259 billion Total scheme members - 5.6 million Active members - 2.0 million Deferred members - 2.0 million Pensioner members - 1.6 million Total administration cost - £1.03 billion Investment costs - £866 million Administration costs - £169 million (Source – MHCLG SF3 statistical return 2016/17)
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