Decision details

            Philip Latham (Clwyd Pension Fund Manager) explained that the recent JGC meeting was cancelled and explained that the PFC would need another special committee meeting to agree the appointment of the operator. Accordingly this item did no longer need to be treated as an exempt item. 

RESOLVED:

The Chairman confirmed that this was the case and resolved that, contrary to the meeting agenda, the press and public would not be excluded from this item.

Before John Wright (Hymans Robertson) delivered a presentation about the Welsh Pool and the procurement process, Colin Everett (Chief Executive) asked whether, given the declarations of interests from Mrs McWilliam, Mr Middleman and Mrs Spalling, they needed to the leave the room. Mr Latham indicated not as the presentation only covered information that was going to be in the public domain. Mr Everett was content with this, but stressed any discussions needed to be kept to generalities and Mrs McWilliam, Mr Middleman and Mrs Spalling should refrain from commenting on or participating in any of the discussion.  Mr Wright confirmed this to be the case and that it would help reinforce the training the Committee had received the previous week.

Key points Mr Wright covered were:

·         that Hymans Robertson were commissioned to officiate over the process only

·         to confirm that the Welsh authorities had been ahead of the other pools in terms of working together, doing this ahead of the government announcement requiring pooling of assets

·         to give background on why the Government chose the criteria that they did.

Mr Wright further commented that:

·         there was a perception that the LGPS was paying too much to Investment Managers but it had since become clear that LGPS funds had negotiated good deals with them, on a par with private sector firms.

·         further work has been done in the area of passive management as a way of reducing costs and it was noted that by working together, the eight Welsh Funds had made big savings.  

·         there was also an impression that some LGPS funds were not well managed, principally as they do not have the governance budget or expertise to do so effectively.

·         some Funds have in-house management teams, so when Funds looked at pooling, some wanted to keep that in-house management.

·         some other pools are setting up their own investment companies, with a mix of private sector investment specialists and existing specialists.

Mr Wright then explained how the Pool structure would work. For information he explained that the operator was who the administering authorities would be procuring.   They would be using an ACS structure, which is a modern tax efficient structure.

Mr Wright confirmed that asset strategy decisions would still be determined at each PFC level, but it would then be for the operator to appoint the investment managers so those strategies could be implemented.

Bidders have already submitted tenders to be the operator, and once evaluated will go to the Chairman of the PFC, and the members of the JGC, with a recommendation. The JGC will then make a recommendation for approval, so effectively the eight Chairmen will report back to each individual Pension Fund within the Pool to make the final decision. Consequently, bidders will have to wait a long time before the final result is known.

Councillor Llewelyn Jones mentioned that the UK government would like the pools to invest in UK infrastructure but then asked what would happen if the Pool wanted to invest in non-UK infrastructure. Mr Wright said the Government could not dictate where to invest, so that option would still be open if there were attractive opportunities.

Mr Everett commented on a governance risk should all eight funds fail to agree with the operator choice. Evaluation needs, therefore, to be made on evidence based information only and under rigour such that every effort is made to resolve any queries or concerns in the event of there being no agreement. 

The Chairman noted that pooling will be a standing item for PFC meetings going forward.

Councillor Bateman asked whether the individual Pension Funds would be forced into accepting specific managers. Mr Wright said that he expected there would be an element of consultation with the Pension Funds but the Operator would be legally responsible for choosing and appointing Investment Managers.

Steve Hibbert (Scheme Member Representative) asked whether Investment Managers would be required to sign up to the Cost Transparency Code. Mr Wright said he expected that this would be a requirement.

The Chairman then asked the Committee to agree to taking Item 6 relating to the Annual Report and Accounts as the next item.  The Committee agreed to the change in order of the agenda.