Agenda item

Report FSD23058

The report presented the draft response of the Local Authority to the Government consultation on accelerating collective pooling of Pension Fund assets, Levelling Up and Private Equity Investments.

In introducing the proposed consultation response, the Director of Finance advised that the draft had been strengthened to reflect Member feedback.  This included changes in relation to proposed reporting requirements which were considered to be excessive in some areas, as well as the lack of reporting obligations for regional pools.  The Chairman added that the consultation response had also been amended to include minor changes suggested by the CEO of the London Collective Investment Vehicle (LCIV) who had voiced similar concerns to the Local Authority and other London Boroughs on the proposals for accelerating collective pooling of Pension Fund assets, Levelling Update and Private Equity investments. 

A key question within the consultation was whether there should be a deadline for the transfer of funds to regional pools and the Director of Finance requested Members’ views, suggesting that any such deadline should be set following tri-annual valuation with a further period allowed for asset allocation which for the Local Authority would be some time after April 2026.  The Chairman suggested that no date should be set for transfer as it was likely to become a deadline, and this was agreed by Members.  Another Member underlined the importance of feeding back how no decision should be made on mandatory investment until changes to the powers or structures of regional pools had been fully implemented. The Member also raised a concern regarding the response to Question 8 which asked whether funds should be able to invest through their own pool in another pool’s investment vehicle, observing that any such arrangement would complicate asset ownership and that it would be more effective for Local Authorities to invest their funds directly in another pool.  Another Member noted the proposed requirements for ‘levelling up’ and queried what would happen to investments made under this requirement should there be a change of Government for whom the ‘levelling up’ agenda was not a priority.

The Committee went on to discuss the response to Question 11 which asked whether funds should have an ambition to invest 10% of their funds into private equity.  It was the strongly held view of Members that the lack of transparency of private equity as an asset class combined with a lack of existing in-house and fund manager expertise in this highly-complex area would make any such ambition an inappropriate and risky investment.  This was particularly the case as the Local Government Pension Scheme was not a public fund but was a privately-owned fund that the Committee had a fiduciary duty to manage on behalf of Scheme Members.  A Member asked that a statement to this effect be included in the consultation response and this was supported by the Committee.  Another Member suggested that a paragraph that formed part of the response to Question 11 on investments outside the UK be removed as it contradicted an earlier statement and this was also supported by Members. 

The Chairman advised that the draft Local Government Pension Scheme consultation response would be updated in line with the suggestions made with a view to submitting the consultation response by the end of September 2023.

RESOLVED: That the draft Local Government Pension Scheme consultation response be approved for submission.