Investment Pooling Proposals - Peninsula Pensions · 2016-10-31 · Devon Pension Fund Employers...

Investment Pooling Proposals

Devon Pension Fund Employers Meeting 2016

DATE

Forging new futures by working together October 2016

Forging new futures by working together October 2016 2


Local Government Pension Scheme pooled investments – The

government will work with Local Government Pension Scheme administering authorities to ensure that they pool investments

to significantly reduce costs, while maintaining overall

investment performance. The government will invite local

authorities to come forward with their own proposals to meet common criteria for delivering savings. A consultation to be

published later this year will set out those detailed criteria as

well as backstop legislation which will ensure that those

administering authorities that do not come forward with

sufficiently ambitious proposals are required to pool

investments.

July 2015 Budget Statement:

Forging new futures by working together October 2016 3


Northern Powerhouse £m Border to Coast £m

Greater Manchester 17,591 Bedfordshire 1,710

Merseyside 6,863 Cumbria 2,027

West Yorkshire 11,319 Durham 2,335

35,773 East Riding 3,677

Lincolnshire 1,756

Lancashire/LPFA £m Northumberland 1,067

Berkshire 1,650 North Yorkshire 2,400

Lancashire 5,831 South Yorkshire 6,277

LPFA 4,646 South Yorkshire PT 214

12,126 Surrey 3,194

Teeside 3,244

Wales £m Tyne and Wear 6,378

Cardiff 1,680 Warwickshire 1,638

Clwyd 1,395 35,918

Dyfed 1,914

Gwent 2,277 Midlands £m

Gwynedd 1,497 Cheshire 4,115

Powys 502 Derbyshire 3,694

Rhondda Cynon Taf 2,408 Leicestershire 3,128

Swansea 1,540 Nottinghamshire 4,079

13,213 Shropshire 1,513

Staffordshire 3,769

Brunel £m West Midlands 11,464

Avon 3,835 W Mids Transport 475

Buckinghamshire 2,206 Worcestershire 1,987

Cornwall 1,522 34,223

Devon 3,374

Dorset 2,301 London £m ACCESS £m £m

Environment Agency 2,877 31-33 London Boroughs 29,094 Cambridgeshire 2,284 Kent 4,539

Gloucestershire 1,709 (two yet to confirm) East Sussex 2,747 Norfolk 2,949

Oxfordshire 1,845 Essex 4,933 Northamptonshire 1,865

Somerset 1,434 Hampshire 5,137 Suffolk 2,198

Wiltshire 1,853 Hertfordshire ?? 3,581 West Sussex 2,976

22,957 Isle of Wight 479 33,687

London Pension Fund Authority

?

Forging new futures by working together

BPP funds and size of assets under management £23.3

£3.9bn

£2.2bn

£1.5bn

£3.4bn

£2.9bn

£1.7bn

£1.8bn

£1.9bn

£1.6bn

£2.3bn

4

Stakeholder engagement presentation

October 2016


Governance and assurance

5


SOG

Shadow operations

group:

Officers of funds

working on 6

workstreams:

1. Structure &

people

2. Asset transition

costs & savings

3. Infrastructure

4. Internal

management

5. Reporting

6. Project office

FLAG

Finance / Legal

assurance group:

Oversight of project

and assurance to

authorities:

• People matters

• Fund

implications

• Service &

contractual

arrangements

• Governance

• Financials

• Location

SOB

Shadow oversight

board:

Representative of

each fund’s PC –

usually chair, with

independent chair:

• Overall oversight

role.

• Engage with the

Brunel Authorities

• Enable

transparency

and

accountability

October 2016

Forging new futures by working together 6


Decision making and informing schedule

Overview panel 08 September – await feedback

FLAG 29 September

SOB 06 October

Engagement days 07, 14 and 17 October

FLAG audio 24 October

FLAG 08 November

SOB 23 November

Authorities First Council 24 November

(Buckinghamshire)

5 in December

3 in January

Last Council 23 February (BANES)

October 2016


Brunel Pension Partnership

Participating Authority 1

Participating Authority 2 …

… Participating Authority 10

The Participating Authorities

The 10 Participating Authorities each decide their strategic asset allocations between the Portfolios (bold lines).

Participating Authorities have direct beneficial ownership of units in the Manager Operated Funds (dotted lines).

Management Contract between each Participating Authority, the Brunel Manager and the Brunel Oversight Board.

Brunel Oversight Board

Brunel client group

Manager Operated Fund 1

Manager Operated Fund 2

Brunel Manager decides on the Portfolios offered and the Manager Operated Funds/managers to be used for each Portfolio. Typically, between 1 and 3 Manager Operated Funds would be chosen for a given Portfolio, with the Brunel Manager specifying the proportions to be invested between those Manager Operated Funds (orange lines).

UK Equities Core Portfolio

Other Brunel Portfolios …

7

Brunel Manager

(FCA authorised Investment Manager)

Board


October 2016



Brunel Company: set-up and approvals process

• By approving FBC Brunel Authorities will decide in principle to

enter implementation stage i.e. set up of Brunel Company and

new governance arrangements, appointing directors, etc.

• Terms of FBC approval should give delegated authority for

implementation to be taken forwards, within set budget

• FLAG (s.151 and Chief Legal Officers) to provide client-side review

• SOB (Pension Committee chairs) to provide fund-side review

• Under proposed timetable:

• Brunel Company established end Q1 2017

• director and senior staff appointments by end Q2 2017

• FCA application in Q3 2017

• Need to clarify:

• point when Brunel Authorities become irrevocably committed

to pool

• what further approval gateways may be required from Brunel

Authorities at that point

October 2016



Proposed operational structure of Brunel Company

October 2016

Portfolio Performance Target

Portfolio Performance Target

UK Core Equities FTSE All Share +1%-2% Diversified Growth Funds 3 Month LIBOR +4.5%

Global Core Equities MSCI World +1-2% Hedge Funds 3 Month LIBOR +4.5%

UK Equities – High FTSE All Share +3% Infrastructure – Capital +7%-8% Absolute

Global Equities – High MSCI World +3% Infrastructure – Income +5%-7% Absolute

Sustainable Equities MSCI World +1%-3% Private Equity 7 Day Libor +5%

Global Equity Income MSCI World +1%-3% Property IPD UK PPF +1%

Low Volatility Global Equity MSCI World Private Debt 3 Month LIBOR +4.5%

Emerging and Frontier Markets

MSCI Emerging Markets +2%-4%

Global Bonds Barclays Global Aggregate Bond Index

+0.5%-1%

Passive Global Equity MSCI World (ACWI) Sterling Corporate Bonds iBoxx Sterling Non-Gilt +1%

Passive UK Equity FTSE All Share UK Gilts FTSE All Stock 15 year +1%

Passive - Other As appropriate Multi-Sector Credit 3 Month LIBOR +3% -4%

Liability Driven Investments

As appropriate



October 2016

Portfolios


Transition Costs

11


October 2016

Transition Timetable:

• Majority of assets will be transitioned on this

timetable

• Illiquid alternative assets may have a longer

transition timetable which will vary by Fund


Transition costs

12


• Costs will be spread over transition period

October 2016

Asset Group Assets to

Transition (£b)

Transition Costs

(£m)

Transition Costs

(%)

Passive Equities 4.7 3.0 0.01%

Active Equities 7.4 17.5 0.08%

Fixed Interest 5.5 6.1 0.03%

Alternatives 3.7 5.3 0.02%

LDI 0.9 0.4 0.00%

Other 1.2 - -

TOTAL 23.3 32.3 0.14%

Portfolio Fee Saving £m

Portfolio Fee Saving £000

UK Core Equities 0.6 Diversified Growth Funds 1.1

Global Core Equities 1.4 Hedge Funds 0.4

UK Equities – High 1.7 Infrastructure – Capital 0.5

Global Equities – High 2.9 Infrastructure – Income 0.6

Sustainable Equities -0.2 Private Equity -0

Global Equity Income 0 Property 2.5

Low Volatility Global Equity 0.1 Private Debt -0.1

Emerging and Frontier Markets 1.7 Global Bonds 0.6

Passive Global Equity 0.8 Sterling Corporate Bonds 0.7

Passive UK Equity 0.4 UK Gilts 0.2

Passive - Other 0.6 Multi-Sector Credit 0.5

Liability Driven Investments 0.0


Fee Savings – £17.1m per annum (Draft)

13


October 2016


Opportunities

14


• Performance gains

• Risk management

• Fund manager engagement

• Long term approach

• Outcome based diversified portfolios

• Internal management

• Existing funds / other pools

• Longer term vision

October 2016


Infrastructure

15


• Likely basic approach

• Partnership with lead manager (UK focus?)

• Supplemented with few additional funds

• National Infrastructure Initiative

• Enhanced approach with internal capacity

• Greater range of funds (specialist)

• Co-investments for control & fee savings

• Regional opportunities?

• Influence and active participation in

national initiative.

October 2016


Section 7: Next steps

16


• FBC issued to FLAG 1 November for meeting 8

November

• Officers will use this to prepare for their

meetings

• Regulations come into effect 1 November

• Implementation: • Brunel Company established end Q1 2017 (stage 3b)

• Interim period from stage 3a to stage 3b

Need to clarify:

• Approval of preparatory activity

• Delegations to carry out activities

• Recruitment of Chair for Brunel Company

October 2016

Forging new futures by working together October 2016

Reminder of information on website

17


Investment Pooling Proposals - Peninsula Pensions · 2016-10-31 · Devon Pension Fund Employers...

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