LGPS CENTRAL POOLING UPDATE Introduction LGPS Central … · 2020. 11. 27. · LGPS CENTRAL POOLING UPDATE Introduction 1. This report continues the series of updates requested by

Pension Fund Committee 04 December 2020

Item 5

LGPS CENTRAL POOLING UPDATE

Introduction

1. This report continues the series of updates requested by Committee on progresstowards delivering investment pooling. It summarises the main activity since the lastupdate presented in September.

Recommendation

2. The Committee is asked to note the position as set out in the report.

LGPS Central Joint Committee

3. The LGPS Central Joint Committee is a public forum for the Councils within theLGPS Central Pool (the Pool) to provide oversight of the delivery of the objectives ofthe Pool, the delivery of client service, the delivery against the LGPS Centralbusiness case and to deal with common investor issues.

4. The Joint Committee provides assistance, guidance and recommendations to theindividual Councils in connection with specific pooling functions taking intoconsideration the conflicting demands and interests of the participants within thePool. The Joint Committee does not have delegated authority to make bindingdecisions on behalf of the participating Councils.

5. The Joint Committee is a public meeting and Cheshire West and Chester Councilact as clerk to the Joint Committee.

6. The Joint Committee usually meets twice yearly in spring and autumn. The spring2020 meeting was cancelled due to the impact of Covid-19 at that time. The autumn2020 meeting was held on 20 November. The meeting was held successfully viaMS Teams with a live webcast available for public viewing

7. The roles of chair and vice chair rotate annually between partner funds. Given thecancellation of the spring 2020 meeting, the November meeting elected CouncillorBiggins from Shropshire as Chair and Councillor Hogg as Vice Chair for the comingyear.

8. Members of the public can submit written questions to the Joint Committee. For theNovember meeting seventeen questions were received. Recognising that the springmeeting was cancelled Joint Committee exercised discretion, for one occasion only,to extend the usual fifteen-minute time allocation for responding to public questions.The questions and responses will be published.

9. The Joint Committee received a report on the work of the Practitioner AdvisoryForum, the officer working group which supports the Joint Committee and theShareholder Forum in the delivery of pooling. Key activity included

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Client related activity

• Scrutiny of investment performance of pooled investment funds.

• Pooled product launches and new product development.

• Approval of key performance indicators for 2020-21.

Shareholder related activity

• Reviewing the outturn forecasts provided by the Company.

• Discussions with the Company regarding future office accommodation as thelease on current accommodation comes to an end in spring 2021.

10. The updated pooling risk register was also reviewed. The risk register reflects therisks to the Investment Pool in its widest definition rather than individual PartnerFunds or the Company.

11. The final item on the Joint Committee agenda was a presentation from LGPSCentral Ltd providing an update on the company and information on theperformance of each of its pooled investment funds.

12. The Joint Committee papers are publicly available on the Fund’s website at

https://www.cheshirepensionfund.org/members/wp-content/uploads/sites/2/2020/11/Joint-Committee-Papers.pdf

Investment performance

13. The Fund is invested in three investment products provided by the company, theClimate Factor Fund, the Global Active Equity Fund and the Private Equity 2019vintage. Performance of the two pooled funds and the Private Equity partnership isincluded in the regular reporting presented to Investment Sub-Committee.

14. Extracts from the company presentation to Joint Committee on the performance ofthe investment products that the Cheshire Fund is invested in are attached inAppendix A for Committee’s information.

15. As previously reported, the Global Active Equity Fund is below target but by adecreasing margin as more recent performance begins to recover the initial bumpystart of this fund. The Climate Factor Fund continues to meet its index trackingbenchmark whilst also making positive contributions to climate outcomes by havingan improved climate footprint.

Asset transition

16. There was no scheduled further transfer of Fund assets into the pool since the lastreport to Committee.

17. Following the decision of this Committee to invest in the pooled Emerging MarketDebt Fund, officers are working with the company and other investee partner fundsto secure a smooth transition of assets in the coming weeks.

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Item 5

18. It had been planned to present the business case for the Fund’s investment in thenew pooled Multi Asset Credit Fund to this meeting. However, the company has notyet finalised the procurement of managers for this fund. Hence that investment casewill now be presented to a future meeting, most likely March 2021.

19. Discussions continue about launching pooled funds for infrastructure and directproperty, with company targeting these for launch by spring 2021.

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THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK

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Classified as Confidential

1LGPS 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

Joint Committee Meeting

Originally Presented 20th November 2020

Extract from LGPS Central Limited Update

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LGPS Central All World Passive Equity Climate MF Fund

2LGPS 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

-15

-10

-5

0

5

10

15

Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20Perf

orm

ance

(%

)

LGPS CENTRAL FUND BENCHMARK

Source: LGPS Central LimitedPage 56 of 112


LGPS Central All World Passive Equity Climate MF Fund



FUND(ACS-PASSIVE)

INCEPTION DATE

TOTAL POOLED ASSETS UNDER MANAGEMENT

PERFORMANCE SINCE

INCEPTION(%)

BENCHMARKSINCE

INCEPTION (%)

TRACKING ERROR

(%)

RELATIVEVs.

BENCHMARK(%)

WITHINTARGET?

LGPS Central All World Passive Equity Climate Multi Factor Fund

Oct-2019 £2,274m +9.60 +9.46 0.10 +0.14 Yes

INVESTORS (2) AMOUNT (£m)

West Midlands 1,713

Cheshire 561 Key Performance

Indicator

Highlights & Outlook

• Fund is meeting its tracking error target• Small outperformance versus index since launch in October

2019• 44% reduction in carbon emissions and 79% reduction in fossil

fuel reserves versus FTSE All World index• Fund also has exposure to five style factors including “quality”

Source: LGPS Central Limited

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FTSE AW Climate Balanced Comprehensive Factor

* Source: FTSE

Climate Characteristics – 12 months to 30 September 2020 versus FTSE All World

3328

698

0500

100015002000250030003500

FTSE All World FTSE AW ClimateBalanced

Comprehensive

Met

ric

To

ns

per

m$

Eq

uit

yFossil Fuel Reserves 79% lower

Reserves

255

142

0

50

100

150

200

250

300

FTSE All World FTSE AW ClimateBalanced ComprehensiveM

etri

c T

on

s/$

m R

even

ue

Carbon Emissions Intensity

44% lower Carbon Emissions 173

122

0

50

100

150

200

FTSE All World FTSE AW ClimateBalanced

Comprehensive

Met

ric

To

ns/

$m

Rev

enu

e

Weighted Average Carbon Emissions Intensity

29% lower WA Carbon Emissions

2.38

3.36

00.5

11.5

22.5

33.5

4

FTSE All World FTSE AW ClimateBalanced Comprehensive

Pro

po

rtio

n o

f to

tal r

even

ue

%

Green Revenues 41% higher Green

Revenues

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LGPS Central Global Equity Active MM Fund



-10

-5

0

5

10

15

20

Perf

orm

ance

(%

)

LGPS CENTRAL FUND TARGET

Source: LGPS Central LimitedPage 59 of 112


LGPS Central Global Equity Active MM Fund



FUND(ACS-ACTIVE)

INCEPTION DATE

TOTAL POOLED ASSETS UNDER MANAGEMENT

PERFORMANCE SINCE

INCEPTION(%)

BENCHMARKSINCE

INCEPTION (%)

TARGETSINCE

INCEPTION(%)

RELATIVEVs.

BENCHMARK(%)

RELATIVEVs.

TARGET(%)

LGPS Central Global Equity Active Multi Manager Fund

Mar-2019 £2,443m +10.17 +11.72 +13.22 -1.55 -3.05

INVESTORS (6) AMOUNT (£m)

West Midlands 902

Staffordshire 576

Leicestershire 387

Cheshire 285

Shropshire 271

Nottinghamshire 22

Key Performance

Indicator

Highlights & Outlook

• “Growth” companies significantly outperforming “value”, which hasnegatively impacted fund performance

• Changed weightings away from “value” manager to “growth” managers• Schroders and Union outperformed their performance objective for the 12

month period to end September 2020• The Fund’s carbon footprint is 33% below that of the index, and over 4oo

engagements undertaken by our stewardship partners in the past 12 months• Since September, performance has improved. Confidence in a market

recovery has risen following the US election and the Covid-19 vaccineannouncement


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LGPS Central PE Primary Partnership 2018 LP

Investments

*All figures as at 30th June 2020


Fund Size: £150mCommitted & Reserved: £150m (100%)

Called to 30th June 2020: 14.2%Called to date: 26.6%

* Includes reserve for management fee where such fees are outside of the commitment amount

FUND COMMITMENT DATE

GEOGRAPHY/ REGION

STRATEGY COMMITMENT AMOUNT*

(GBP EQUIVALENT)

STATUS NUMBER OF UNDERLYING COMPANIES

FUND CAPITAL CALLED

(GBP EQUIVALENT)

Baring Private Equity Asia Fund VII February 2019 Asia Mid-Large Buyouts £30.5m Investing 9 ~32%

KKR Europe V April 2019 Europe Mid-Large Buyouts £31.7m Investing 6 ~20%

Blackstone Capital Partners VIII May 2019 Global Mega Buyouts £31.5m Investing Nil Nil

Permira VIII June 2019 GlobalGrowth Mega

Buyouts£30.6m Investing 4 ~17%

Madison Dearborn VIII October 2019 USA Growth Buyouts £26.0m Investing 1 Nil

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LGPS Central PE Co-Investment Partnership 2018 LP

Investments

*All figures as at 30th June 2020


Fund Size: £107mInvested, Committed & Reserved: £107m (100%)

Called to 30th June 2020: 88.9%Called to date: 90.8%

FUND COMMITMENT DATE

GEOGRAPHY/ REGION

SECTOR INDUSTRY COMMITMENT AMOUNT

(GBP EQUIVALENT)

CAPITAL CALLED

(GBP EQUIVALENT)

GFL Environmental April 2019 North AmericaWaste / Business

ServicesWaste Removal

& Disposal£20.7m £20.5m

Transporeon April 2019 Europe SoftwareSoftware for Road Freight Operators

£15.0m £15.0m

IVC Group June 2019 Europe Medical ServicesVeterinary Care

£20.7m £20.7m

Acuon CapitalSeptember

2019Asia Financial Services

Savings bank and alternative lender

£20.5m £20.2m

EyeCare Partners January 2020 USA Medical ServicesOphthalmology & Optometry Care

£24.2m £18.6m

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This document has been produced by LGPS Central Limited and is intended solely for information purposes.Any opinions, forecasts or estimates herein constitute a judgement, as at the date of this report, that is subjectto change without notice. It does not constitute an offer or an invitation by or on behalf of LGPS Central Limited to any person to buy or sell any security. Any reference to past performance is not a guide to the future.The information and analysis contained in this publication have been compiled or arrived at from sourcesbelieved to be reliable, but LGPS Central Limited does not make any representation as to their accuracy orcompleteness and does not accept any liability from loss arising from the use thereof. The opinions andconclusions expressed in this document are solely those of the author.

This document may not be produced, either in whole or part, without the written permission of LGPS CentralLimited.

All information is prepared as of 06.11.2020.

This document is intended for PROFESSIONAL CLIENTS only.

LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in EnglandRegistered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB

DISCLAIMER

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LGPS CENTRAL POOLING UPDATE Introduction LGPS Central … · 2020. 11. 27. · LGPS CENTRAL POOLING UPDATE Introduction 1. This report continues the series of updates requested by

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