Response to the FT’s Coverage of the LGPS.

Dear Reader,

Our comments relate to the FT's coverage of difficulties many LGPS participants perceive in taking strategic asset allocation advice from their respective pools (Jan 16th FT). A white paper entitled 'The Future of Investment Strategy Advice in the LGPS', authored by Hymans Robertson, refers.

Whilst forcing partner funds to do this is a probably a step too far, the paper downplays the benefits of integration.

Many pension funds have done this for years, such as the PPF, USS, BT, Railpen and NEST. Integration is the default model in larger insurance companies. It would sound quite odd to this group to procure outside advice on asset allocation.

In these organisations the executive (i.e. that which gives the advice and then implements it) is directly accountable to their respective boards and owners for quality of advice and subsequent delivery. We don't see this alignment as a conflict, as accountability is direct, but as an advantage.

The report could have provided a more balanced picture by exploring how these organisations operate and whether the advantages could indeed carry over to a consolidated LGPS.

Regarding execution, we could see a model developing where the pools, at least initially, licence software already established in the market, assembling small but expert internal teams to provide the advice. This would enable a focused service to the partner funds whilst reducing advisory overhead.

To conclude, we acknowledge the interesting and thoughtful work highlighted in Hymans’ report. The paper is well written; the arguments laid out for all to see. However, we think the analysis presents an incomplete picture, our experience of other large asset owners is that an integrated model can work very well. The key, of course, is capable, aligned governance, and resourcing, but we think this should be perfectly achievable. Indeed, some pools have already achieved it.

Yours faithfully,

Bart Heenk and Ian McKinlay