Transcript

Good evening, everybody. My name is Councillor Norman Marshall. I'm Chair of the Joint Pensions Committee and we are about to start. We've had apologies from Councillor Sarah and Councillor Crookedake and one or two more members of the committee may be about to join us. In the meantime, I'm going to ask members of the committee just to state your presence. I'll call your names in alphabetical order. Please switch on your microphone to confirm your attendance. Councillor Caddy. Present. Deputy Chair, Councillor Craigie. Good evening. Councillor Crookedake has had apologies. Councillor Dickadem may well be on his way. Councillor Gasser, I know, is in the building, so I think she might be there very shortly. Councillor Ireland. Good evening. And Councillor Pridham. Present. We have a number of officers present who will introduce themselves when they address the committee. Item one are the minutes of our meeting on the 15th of October, which you've all received and are published. Any comments from any members of the committee? No? So those are approved then. Thank you. Good evening, Councillor Dickadam. We've just done the roll call, but welcome. Disclosable pecuniary interests. Are there any declarations of pecuniary or other registrable or non-registrable interests? No? Thank you. Item three. Minutes of the local pension board. Please, can we note the minutes of the local pension board for information if there are any questions? Noted. Thank you. And item four. Response to the MHL-CLG-LGPS, a lot of initials consultation, fit for the future. The director of finance will introduce this report, and he'll get the acronyms right for me. Thank you, Chair. So the paper in front of you outlines what the government are seeking to get a response from on the consultation. We've discussed previously about calls for evidence that the government's looking at doing, how pooling operates, how it's been working, and moving that forward to the next stage. And I think the way that it's been set out in the documentation that's linked to this report, you'll see what the government's agenda is. And many of the activities that is currently taken by this committee and by officers within the fund would transfer over to the pool if the proposals outlined here are taken forward in their entirety. Outlined really on paragraph seven of the report really shows you what the proposals are looking to do. So the committee will remain responsible for setting high-level investment strategies. But in reality, that will be restricted to, when it's talking around the asset allocation element, just at a high level, i.e. you'll be saying equity. You won't be saying you want elements in sustainable equity, elements in growth, elements in UK versus global. And even more importantly, you won't have the ability to decide whether you want to be active or passive. Because the government believes that that is an implementation role, rather than it being a risk management role. And that's what's transferring over to London Civ on our behalf. Similarly, when we're looking at getting advice on how all of these things should be functioned, who would you be turning to, at present, we use MRSA as an independent advisor to be able to give us that overview on our approach. And similarly, you know, potentially challenge the role of the pool and the role of any fund managers that we currently have. Government are proposing to take that away. And so you'll be seeking, and you'll be getting your principal advice from the pool, who will also be responsible for delivering the implementation on the returns. Pools themselves will be required to be regulated, which gives some comfort that there should be sufficient oversight on them, and they should have the relevant expertise to be able to do that. Five of the eight pools are currently FCA regulated, London Civ being one of those. And what we will be required to do is to transfer all of our assets under their management, and that will need to be completed by March 2026. Currently, at the moment, you know, we've always taken the approach that, you know, that we're expected to pool all the money, but we had the ability, if we believe genuinely, that the strategy was not aligned to our own. We had the option to invest elsewhere and would report back on a comply and or explain basis. That's gone. There is no discretion now. 100% of the assets will need to be managed by the pool. The definition of managed, we don't know at present, and there will be, you know, exactly what it means by that. And the reason why I'm highlighting on that is some of the private market assets are going to be far more difficult to transition than the sort of your equity and other sort of liquid-based assets. And the pools themselves, they'll be here later on on the agenda when we're talking in the closed section of the meeting about performance. But no doubt you may have some questions you may want to ask them about their capacity, because what they'll be looking to try to do in this intervening period is grow their own resources and staffing and gear up and develop a plan for how they're going to take on these responsibilities from April 2026. So there is a table in the paper which sort of highlights this, which is on the top of page 16, which sort of really sort of starts to explain what the current role that we have and the proposed role going forward. So if we look at it, and starting at the top, you'll see the investment objectives, the high-level element, i.e. the return levels, risk tolerances, our investment preferences, you know, that still will remain, as is now, with this committee. And the pool will use that advisory role that we talked about, mentioned before, about how to help us shape those thought processes and taking it forward. The next level is strategic asset allocation. Now, the government have given a steer. They would prefer that funds transfer that over to the pool as well. However, they have given discretion for us to be retained, and it is something that I would advocate that you, as the trustees, you know, quasar trustees of the fund, and ultimately accountable and responsible for the delivery and the fallout, if the fund succeeds or doesn't, you'd want to retain that. Because, normally speaking, if you talk to advisors and everything else, they would say the core function, really, of how you get your returns is making sure you've got the right asset allocation. The, you know, the implementation of that does give, you know, a certain level of return. But fundamentally, if you look at who's performed well and not so, lead tables, quite often it is linked to asset allocation. So that can be remained with us. Now, this is where things begin to change. We're talking about tactical allocation. So fairly recently, we've had some changes where we decided to exit our UK-only strategy for equity. We had 20-odd percent of our fund allocated to the UK. We moved that all onto a global basis. That is a decision that the committee made, and that is deemed to be tactical. That will no longer be in your gift. That's a good example to show what will be transitioning. So you still have the ability to say equity, but you won't be able to say that geographical bias. Similarly, and more importantly from my perspective, because I think it fundamentally goes into risk management, is you will not have the ability to determine whether or not assets are managed on a passive basis or an active basis. So, you know, all the textbooks, everything else talks around about active risk and how you can gain or lose from that. But the proposals that the government are putting forward at the moment, in their view, is that this is not risk management. This is all about implementation, and this should not be in the gift of the fund. You'll notice later on down, when I'm talking about where we should be prioritising, myself and not just me, most of London, if not all of London, are fully behind exactly these comments here and will be writing in their responses, as will Society of London Treasurers, that the active versus passive debate is something where we feel is risk management and should be retained by the funds. The underlying other aspects, like geographical allocations... Well, that was what I was going to say, is surely geographical allocation also speaks to risk, because if you're well diversified, that's going to reduce your risk. And if you're all in one particular area, or all local, for example, or more local than you would have been otherwise, that's going to affect risk as well. It would, but as you'll see in the report, I'm saying, you know, we can only really focus on a few key areas. If we have 32 responses for London, 86 different responses for the LGPS overall, we'll get zero changes made to these proposals. So what London have agreed as a group is to try to concentrate where the officers and the advice that we've got going forward, where we think it will make the most difference. Majority of people are MS...it would go for a global, you know, an MSCI type approach. It's unlikely, very unlikely, that a pool would recommend you put it all into one geographical location. Bearing in mind that they're going to be FCA regulated, they will do. So when we're looking around where do we want to focus on, I agree with what you're saying on that, but it's not a priority because we want to concentrate on some of the, just a handful of areas, and active versus passive has the most difference when we're looking at those sort of things on that risk basis. Can I ask a sort of principle question on the actual, I guess, sort of rationale behind the way we're responding? Are we assuming that the government can't sort of process more than one idea at once? I mean, would it not be sensible to do a response that has all of the points that we disagree with, you know, sort of logically laid out, and then, I don't know, perhaps we say, but our top three would be, you know, passive versus active, the other ones that we've selected? It just feels sort of disingenuous to fill in a response, not putting the things that we think. The response is broad in line what you're saying, but I'm going to grant you the detail. I'm saying XYZ. We're saying that there are a number of areas. However, for the purpose of prioritisation, it is active versus passive. So primarily what you said is what's in there. We're not articulating it on an underlying basis because we've been given a very, very strong steer from the government. They are not for turning. They're not for moving. And they are, if we go in on a very sort of dispersed approach rather than targeting a few key areas, we won't get any changes. So you say that the government have effectively said if we highlight some of the problems, we won't get some of what we want, which, you know, seems to be a very, that seems to be a sort of controversial approach. I mean, you know, that they may well not be for turning, that's fine, but that doesn't stop us raising the issues that we've got concerns about. And as I said, we are raising some of them, but we've got to, we cannot, there's 30-odd questions, we cannot say no, no, no, no, no, no, no. You're getting, seriously, we've had the Treasury, we've had MCLLG, we've had Jim McMahon, we've had Emma Reynolds, we've had Rachel Reeves, all give presentations and harming in on the fact is that they've got the call for evidence, they've spoken to the pools, bearing in mind that the pools have got their approaches and their views, and their views will be different to ours on this. And look into the, so what we need to try to show, if we really want to, we need a unity in strength, so London as a whole have come together and trying to come up with some things. And this is what you're seeing here, is that the officers have met, so you've got the, there's a group called the Pensions Leaders Group, which comprises of Section 151 officers, Deputy 151 officers and pension managers, to say where do we think the key focal points will be. And that's one, there are a few others which I'll come on to later. I understand that, but the point is, is if we all said no, no, no, no, no to the whole thing, it would make clear that we don't really agree with the approach, which is in itself a sort of valid response to the consultation. And what they don't want, I mean, it's pretty obvious what they don't want, they don't want people to be able to say, well, look, you know, out of the 86 administering authorities, 86 of them, said no, no, no, no, no to the consultation. They all think it's a rubbish idea because of these reasons. They want us to kind of say, well, we're not going to say too much, but we'll, you know, get what we want by just focusing on four things, which I think is a really untransparent and not a great way of doing a consultation, to be honest. I think we should be honest about our views and then prioritise what we think should and shouldn't happen. Thank you. Yeah, but like I said, London, we're trying to get a generic thing. So we are saying that, but, you know, if you're thinking about some of the granular detail, if we're spelling out everything, what we wanted to do, and this isn't the first iteration of this, remember, they had the call for evidence, they've gone round where we've explained all of this before, and this is what they've come up with, and this is what they're saying. They've listened to individuals, they've had meetings with us and with all of them, and this is what they've said, following on from all of those comments, this is now what they're doing, and then for us to go back to. So if this was in the first area, I completely agree with what you're saying, but we've already had that, we've already had all the meetings, and this is now what they're churning out with and saying this is how they want to seek to do it. We are raising points about saying, you know, in the return that it's much broader than that, but because there's so many questions, if I couldn't write sort of that amount of detail for everything, and the homing on it, so if you think about where is the biggest implication that we're going to get, active versus passive is a fundamentally goes into the harm of risk management, whether you're UK, US, geographical, whether you're going to be value, whether you're going to be growth, that is implementation. The only technical, like really in detail, hundreds of pages of consultation that I've overseen before is with the local plan and the national policy planning framework, and they have a kind of support, don't support, or kind of ambivalence, and then you fill in a box that is empty in which you can fill in lots of detail, and to your point, I mean, if there's a strategic decision, which is there are deals behind closed doors, which is what you're kind of getting at, in which there are the three key areas that we want to focus on collectively as funds, and we don't want to stir up too much trouble because we've already submitted all the evidence, we know which direction wind's blowing. Would that be an area whereby you could say, like we said in our evidence giving, these are our concerns with that, but we understand direction of travel as a formula through which you articulate consistency in the approach that we gave in the evidence part. Is that, it's kind of a practical question, like is that how the form works? Because, you know, the different, you know, we fill in lots of different government consultations and the forms are often different. The link on here shows you what the form is, so there isn't, it's just a Q&A. It's just a question you asked to respond. So that premise of what you said is how I responded to that particular question. It's saying that we've got a much broader areas, however, for the purpose of this we're focusing in purely on that because I've already had the conversations with the actuary who's advising the government on this. I've met with the Treasury, I've met with the others, and the angle where we're looking at is, and we've been rebuffed in that initial meeting on active versus passive, we've been rebuffed on that, but we're still trying to push because we've been rebuffed already in those meetings. We want to push and try and home in on a particular angle. And we're not united across the country on this. The pools want to have active versus passive, and there will be some of the larger funds who are in those smaller pools are happy for them to run it and do everything else. So we need to be pragmatic and try to understand what is it that's going to make the most difference. And when you've got issues around, you're not picking your managers because that's gone anyway. You're not picking your strategies because that's going anyway. You can't leave the pool to go somewhere else because everything must be in your pool. What's the only gift that you can do? And that will be having faith that you believe equities are good or bad. And then you go with the market rather than style bias if you've got some concerns. And that's why I'm homing in saying that's the key one because you don't have any other option. This is, you know, the idea when we come on to governance and we talk around later on about, oh, you're the owners, so therefore you can have control. Well, we're not. Well, one of 32, they're talking about having two representatives on a board. That gives you no control, no oversight. And when you are an owner and it's your own money, and there are other strategies where, you know, and other big, you know, big, large business corporate entities will have a similar style where you get your advice and implementation done by the same entity, it's fiduciary management, and quite a few will end up doing that. But the difference here is that if you're not happy with the person who's doing it for you, you have the ability to leave them and go somewhere else. None of that is possible for us under any of these proposals. 100% of all your assets will be in there. So when we, you know, and this is part of the challenge of when we're thinking that why I am really homing in, and, you know, there's been articles written in 151 and a few other sort of journals where not just me but others are homing in and saying this is the key one out of everything that we want the ability to retain. That's not to say that we won't go along, that the Apple, even if we don't get it, we can agree with them in going forward. If you've got a good harmonious relationship and it all works well, they want to listen to our views, and I would imagine the SIF coming here will say, clearly if you want to, you know, at the moment we've got 55% in equity as a benchmark. If you wanted to do 25, 30, they clearly would listen to us and you would hope that they would follow those lines. But it's not to say that they would do going forward or if they've got another reason why they need to do it somewhere different because there isn't a real strong conflict of interest policy anyway for themselves either. So there's a load of issues that have not been thought through properly. And so therefore, how can you, when we're looking at giving a response, how can you make sure that we get the best control that we can? And governance is another one. When I come on to it later on when we're discussing later on, there's no mention of it in any of the paper. The talk about governance on yourselves, support, training, or making sure that there's oversight in controlling this committee and officers, what we do, there's nothing on the pool. There's no, you know, there's no conflict of interest. There's no how to dispute resolution policy about if they're not delivering what we need to do. We'll talk about ESG in a second around the implementation and how that's going to operate. None of that is there. I was going to say, whilst Paul looks back in, most of the questions you do, whilst they're looking for text, you do have to answer fully agree, somewhat agree, somewhat disagree, or fully disagree. That's still there. Not for every question, but for most of the questions. A point of clarification from me. So we're retaining control of investment objectives, at least. So we could decide to have a higher equity investment. And I can see that at the bottom right-hand corner of the definitions there, it talks about responsible investment. So we'd have some decisions, for example, about environmental stance, and particularly ethical stance, which our last meeting was very much taken up with. And I think one can envisage further down the line that there might be something where there would be a strongly tilted investment offered to us by a medium ethically tilted and a lower tilted, for example. There's something that might come forward. But this is at the higher end of the outcome on the fund. But the actual implementation of this is with the pool. What's the effect on us as Wandsworth for our schools and our employees in terms of the contributions that they have to make? If, for example, we make a choice at this high level that is, for example, very advantageous and we happen to get it right because we've chosen, do we get the benefit of that if, likewise, we make a choice knowingly that it's going to be perhaps less advantageous if we take a particular ethical stance that shuts us out of some very profitable investments? Does that actually roll through to us and then we have to take a hit on the contributions? And how is that set off against the tactical asset allocation, for example, which is out of our hands? That's highlighted in paragraph 14, where we can see the change in movement. Obviously, any performance, even now, you're making decisions about, you know, and if we succeed in the way that it's implemented and our returns are greater, it means the contribution rate will be lower. And if, obviously, the reverse effect happens, the contribution rates will go up. And, you know, a 1% change in our contribution rate will roughly equate to £2.9 million in extra contributions. But either way, so if they do better than we would have done, you'd save 2.9. So it goes in both directions. Right, but is there any element of sharing this risk and return across the pool? Or is it actually very, very individual to each member of the pool? It's the same as is now, is that they are, you know, the strategy that they will come up with will ultimately be, well, at the moment the way it's phrased is it won't be one common strategy. It will be, you know, each individual. And especially if we're setting our own asset allocation, because that's Key's crutch to some of these movements. And why I'm saying that is it's essential that we retain that ability to pick and choose how we do it. Because if you passed it all over to them, then you may well find yourself with a one that isn't fully aligned to the way that we would like it to be. But it is the same at the moment. They're only, you know, they're not a private company. They're owned by us, the 32 things. There's no profit to be made from the pool. So there's no risk sharing in the sense of, okay, they will take a cut in their profit, because there is no profit. This is, you know, a joint venture between all of us. We're all loaned an equal share as underlying funds sitting within it. But the liabilities stay here. So if it goes wrong at the moment, you know, you get to choose exactly, you know, to a degree largely how everything is being delivered, and you reap the benefits or you pick up the, you know, the struggles as a direct result. Now, you know, you've got all the liability, but you haven't got the implementation angles being moved away. Now, there is an argument that, you know, that by having the pools, you're going to have individuals who are appropriately trained, who are fully dedicated to this particular angle, and they could deliver better performance. That's what the outcome of this is about. No, but this is, obviously, the idea is that you have highly professional, qualified individuals who are best placed for managing the fund on a long-term basis. Remember, this isn't a three- or five-year portfolio. This is a 60-, 70-, 80-year structure. So that is the aim of what they're seeking to do. It is also, there is a big agenda, we'll talk about local later on, about trying to get money into good investments into infrastructure within the local environment, whatever local means, to deliver good returns for the community, not just in financial returns, but also other benefits that could come, could be delivered better through this sort of operation than it would be being quite fragmented. But to be fair to the government, you know, if you look at some of the statistics, not for us, but for other funds as well, the drive has been to get all of the money into the pool, consolidate it, be a lot more efficient, have a far fewer number of mandates coming across, so you get economies of scales, get better returns. Many funds have not transitioned a load of their assets in, so the government are now taking this stance and saying, all in, 2026, underlying oversight, whether it's directly managed or whether it's on a dotted line, like I think it will be for a few more years to come, certainly for those private market assets. So that's really where it is. So I'm not as concerned about that, because that was the agenda since 2016, when they brought in the idea of having the manager's selection being done by the pool rather than us. I mean, if I can just summarise then for a second, come back to both of you, if I may. But the key decision that we might be able to take this evening is what our stance is going to be in our response here. And the advice of the officer is that we should take note of the fact that there's a lot of these are a foregone conclusion, and there's no point making a big objection. But it's also been put forward by Councillor Caddy that actually we should be saying what we think. And so I'd just like to make sure that I understand what the rest of the members of the committee think about that particular issue, whether we'd like to suggest to the officer that we go for a much more robust rebuttal of these principles, even if we know that they're not going to be accepted, or whether we should focus on things or battles that we think that we can possibly win. Sorry. So, yes, Councillor Gasser and then Councillor Dickerton. Yeah. Thank you. I just had a question just to understand. Am I right in thinking you're going to fill in this form on behalf of all the London councils? So it's one, or we're each going to fill it in saying the same thing? So there's two, in essence. So Society of London Treasurers, which is the group that represents all of the Section 151 officers, is giving their own response for which I'm part of the group that's helping to prepare that. It's not in my name. It's in the Society of London Treasurers. And I'm not the lead officer on it either. It's Damon Cook, who is a Section 151 officer over at Greenwich. He is the lead from that. There are several other 151 officers on there. There's myself as one of the Deputy 151s. And there's two of us. And then there's three pension managers that are helping to collate. And that's going across to everybody, across London, for them to have a common thread about what we're looking to seek to do. What we're saying, though, is as a group, we want to try to make sure that the responses for each underlying fund are as close as possible to that SLT response, to show solidarity, to show that we're all on the same page, to try and give it the best of our strength to get some change where we think it's most important. Everyone will have some nuances, and they will have some slightly differing views on certain aspects. And some of them won't agree with what we will. We'll have a differing in one, because you're not going to get all 32 agree with everything on those areas. But what we're trying to say is to try to make it as strong as possible to home in on those core areas and focus on that aspect. There are some, when it comes around to doing that response on the passive versus active, that are going a stage further and saying they want to have control over whether or not it's ESG, fully ESG integrated or not, and everything else. So there are some that we'll put more detail in, but they are in the minority. Most of them will be going along the lines of the sort of common thread that goes in. And we will deviate on certain areas from where it is. But in general, on that particular point, we would be saying it's much broader than active versus passive. But we would be saying that if we're only going to get one change on it, that's the change that we want. So it is in line with what Councillor Cady is saying, but without going into detailed granular elements of, you know, picking out, you know, saying the difference between value and growth, difference between UK, US and global. But we are highlighting it is a broader, and we do, and we're not happy. But if we're only going to get one on that particular one, that is that active versus passive is the crux of our argument. Yeah, so broadly it's about control, right? It's about, and that was in with the previous government as well. Well, yeah, yeah, I guess the bit that, and look, I can understand the logic behind, if we're going to come on to it, the local part, you know, the impetus behind trying to invest in infrastructure in this country. But I still can't quite work out, and I couldn't work out from this paper. And you mentioned that, you know, the two delegates that then go to the sieve. Like, I can't work out the democratic pathway through which someone who's in the scheme of, you know, a staff member in Wandsworth or a resident who cares about where the local borrower's pension is going, what is their democratic process through which they would implement, they would be able to influence the pool? Because we know how they do it with us, because they come and they lobby us and they give deputations. But if that disappears, I'm not really sure, you know, I'm not really sure, yeah, you could end up with a kind of black box of, like you say, professionals who aren't responsive or have no, there's no control from the general public of which these pensions are meant to serve. So that's the bit that I'm nervous about, because you can centralize control as long as there's a medium through which the local people can influence the decisions that are being made, right? And it seems like that's the bit that is very weak at the moment. Exactly. And obviously, I haven't articulated it particularly well in the report, because I actually have highlighted the same and same one of our elements is they're talking about having two shareholder reps on the board. We already have those already within the sieve. I'm saying that's far too weak. It doesn't be for the points that you're highlighting at the moment. I haven't gone into the granular detail and talking about it being from a scheme member perspective. I'm talking about it from being a partner of those 32 partners. We've got no influence. We've got no say. We've got no direction. There is no contract management. There is no client's relationship scenario where you've got that ability to challenge and to push back. And there's no dispute resolution policy. None of that's been thought through in these proposals. And I have said that in this report, and we are saying that in our return. And to be fair to Dean, the chief executive of the sieve, he's been keen, even before this came around, about having a much more formalized SLA arrangement, which is what we're talking about here. But it needs to have bite. It needs to be – if this is all going to be put in statute, that needs to be put in statute. There needs to be an appropriate dispute resolution policy so that if, for whatever reason, we're talking around about the implementation, we don't support, we think it's fully wrong, that we have the ability to somehow get someone to be able to generally challenge that and there to be some independent review and to direct change. You know, we can't influence that. And the government are clearly saying that we shouldn't be influencing it. I can understand why not as – you know, because they can't have 32 people pushing in different directions. But if what they're proposing is fundamentally against that high level, we talked about the top one of the table, and we fundamentally think it is, there has to be a route forward for us to be able to push back and challenge. The proposals are silent on that, and there isn't anything currently that would enable us to – well, there is at the moment enable us to do it because we've got the complier explained. And we've done it twice where we had the situation where for energy transition, we went our own way. We talked about Octopus and Sandbrook. And then when we had the buy-and-maintain credit mandate, the bond mandates that we put in, again, we were able to use something. And the civil – certainly in the latter one, the civil worked well with us. That showed you a good idea about how we work well together at the moment. But that's because there is a harmonious relationship. It hasn't always been like that. With personnel changes and everything else, you don't know what would happen in the future, which is why I'm advocating. And one of the public points you'll see in our responses will focus on and strengthen in that area so that we can really try to ensure that we are protected where we can be. So I think I'm getting the sense from the meeting is that we have quite a lot of concerns about where this is going. But it does seem clear as if the mood from government is not one that's going to allow an awful lot of discussion about this. Nevertheless, we'd like the officers to put our concerns into the response so that they stand on the record. Is that the general point of view of that? That was only really the start of where we were at. There are some key – yeah, you could spend hours on this. I'll try and be quick. Back to Mr. Gelotti. Sorry. No, no, no, because you do need to understand there is – you know, we have strengthened some of our bits on governance here. And, you know, for us, we do have – you know, we've stress-tested ourselves against the various different codes of practice and the other elements. I've been focusing and, you know, really trying to advise people the direction of travel we're going in on training. This is going to become a legal requirement and, you know, and the onus on yourselves and what you will must be doing, you know, and going on out. So there will need to be some real robust elements. We're going to have to appoint an independent individual to sit on the committee to be as an advisor who can be looking at doing that. We're going to have to have a designated senior responsible officer for the fund. We've got it already anyway. I mean, I cover all aspects, but not all funds have the admin, the accounts, and the investments all sitting under one. So it's not for us. We are going to have to start producing a lot more reporting elements that will come through on what we're having to do. There's going to be a biannual review on how well you guys are performing and what you're doing, whether you are appropriately trained, whether you're actually making the right decisions, albeit that most of the outcomes of what you really want are actually not going to be done by yourselves. So there are some key fundamental parts about what we'll need to be doing on that. So in essence, there will be a lot more onus on yourselves and a lot more training and a lot more evidence that you are the right individual to be on this committee. But the decisions that will make the most difference won't be done by you. They'll be done by the pool. Well, except for this decision at the top of the... At the top. Which is a pretty weighty decision. And that's why they're saying that the appropriateness of the individuals that are sat around this table need to be evidenced with it. So, and, you know, the local pension board are something you're required hardwired in around the training requirements and evidence in they have the relevant knowledge and expertise in order to do that. That is something that is, you know, as members of the committee, you need to understand what you're going to be stress test more as individuals being on this committee than you have been before. I mean, I would... Yeah. Just on there, I mean, this is wrongheaded, I think. And I appreciate the government is moving in this direction regardless of what we say. But we only need to meet once every three years under this criteria because we only do the asset allocation review once every three years. So we just need a reasonably qualified set of people to turn up for a couple of meetings every three years. You'll tell us how the fund's done. We'll look at the asset allocation and the funding level. We'll make the decision, or someone will make the decision, and then we'll go dormant again. Because there's literally nothing else to do every two months other than that. Who are these people they're going to train up to meet four times a year to discuss what decision they'll make every three years? It just doesn't work. It doesn't add up. Right? I don't have a significant differing view from what you're saying. However, I mean, it isn't just a dump and run for three years scenario. I mean, we have that thing. As you look to others, you hit them on the headcount. There is that onus on you to monitor and to ensure that change is made. Because whilst there might be an asset allocation review every three years, we know when you have other key moments, whether it be a COVID-type scenario, whether it be a Brexit-type scenario, there will always be key factors where, again, you would have those fundamental points where you need to come in and do something differently. There's also times of change when you see the movements wanting to go differently. You'll be potentially looking to keep an update on ESG deliveries, deliverables, and how well we're performing on other aspects. So the bite that you will have and the ability to influence change rapidly like you have now is gone. Rapidly. Rapidly in the sense of compared to what it will be going forward. But the idea that you will be doing nothing in the interim period I don't think is right. However, it's going to be much more engagement with the poll. And, you know, one of the questions, I know Sylvie's in the back, but they'll be here later on on a more formal setting in the closed session. And they'll be looking about how they will be proposing to address some of those concerns. You may wish to ask of Sylvie and Rob when they're, you know, in their session a bit later. But I think, yes, I mean, it will be more of a client contract management type role, liaising with the poll about what they're doing, how they're doing it, how they're meeting that high-level objective. But there will be limited stuff. We're not, you know, you're not going to be looking at changing our asset allocation review regularly. So you're not going to be looking at moving like we did with any transition out and moving that stuff. That won't be happening. Yes, Councillor Gasser, Councillor Dicklem. Yeah, just to sort of re-emphasise, we'll be monitoring. But if we're not happy, there's absolutely nothing we can do. At the moment, because there's no other element of the governance around how we size it up, that's not to say that the CIV wouldn't implement their own and have that process going forward. And I would be surprised if Dean and the team don't have a way for us to engage properly with them, because that's not in the nature of them and certainly the way that we're working together at the moment. I think it will be collaborative. But if we're looking to try and put parameters in place, who's responsible for what, we should be saying in this consultation, there's a gap here. We need that strength to give us that. Should they not be willing to listen? In your professional opinion, what weighting of this is based on the attempt to try and direct funds towards more domestic infrastructure and the growth agenda, and what weighting of it is around curbing the ability of local authorities to make ESG decisions that are out of, you know, that are complicated or, you know, political? Because, you know, we saw with the previous government, the boycott bill, there was a particular attempt to stop divestment. We know that loads of councils have had to go through tricky meetings. We went through one, but I think we handled it well. Like, what weighting do you think is – I mean, is that not a question? Because is it to create a single body that would then have to face that kind of pressure? But there's no mechanism. So it's hard for me to – you know, in some ways I should be able to find out, but it's very difficult to work out, like, what the direct impetus is, other than central government's obvious desire to have more control over things and wider efficiencies. But those are the two areas in which pensions have had a political element in local government, right? I can give a personal view, rather than it being from the ones of fun, per se. From having, you know, been in meetings with ministers and with Treasury and other civil servants. I don't think it's there to try to steer on the direction on ESG or on any humanitarian policies. Generally, that conversation has never cropped up. Directing and forcing people to have it all under one umbrella, so rather than having, say, in London, 300, 400 mandates, consolidating that down, so there's greater control and efficiency. Yes, I think that is the benefit of what they're seeking to try to do. But I also feel as though there is the idea that it's easier to control eight than it is 86, and when all the money's sat with eight to give a steer that they expect to have more money directed towards the UK investment, then I think both the previous and the current government, when I met with them and I had presentations from both responsible ministers, they were saying the same, that it's, you know, if you're not going to do this, you need to realise that the fund is there to support more than just necessarily the return here. And you can get some good investments by investing in the UK, and I think that there is, by doing this, they're able to direct it easier than if there's 86. Two questions. Probably the first one is easier to answer and more straightforward. If we have a liquid assets, is there any flexibility on when we need to transfer them? Are we able to sort of negotiate with them in terms of when we can move it or get it out? Well, 94% of our liquid assets are already invested with the SIV. So the only investment that we have, and that's part of the reason, we're already gearing up. So we were very compliant, and we've always worked well in the approach. And that's why I said we moved the bio-maintained bonds. That took us to the 94. We weren't, you know, because we said no originally, and the SIV compromised, and it worked for us. It wasn't optimum, but there needs to be compromise on both. But all we've got left is Oak Hill, which is our multi-asset credit. We won't be able to pick multi-asset credit going forward, because you would have seen, if you look onto the link, there was only eight buckets of credit in general, you know, that would be going in under one umbrella, rather than it being private debt and multi-asset credit separately. But the reason why that's outside is that, at the moment, CQS, which is the other, are predominantly a European house, an Oak Hill, or a U.S. house, so therefore it complements one another. But in essence, longer term, in essence, no, everything must be under the management. And I use that term. It doesn't mean that they'll be transferred into, because we've got a lot of legacy private market funds that will be very complicated to transfer, you know, by 2026 under it. So the conversations that we've had with SIV are on a very pragmatic basis that, well, they'll have to have, you know, under these provisions, oversight and the ability, if they thought fit, to sell on the secondary market, but they wouldn't be expecting us to sell it all and then move it in as of 2026. But as of liquid, for us, I'm hoping that we can find a solution for Oak Hill, and in which case it will be a moot point, because we'd have had everything. And even now it's low risk, because it's 94% with them already. The second question is about this local investment, because I personally, you know, think it's a terrible idea, you know, that the point of a pension scheme is to support its members and to provide an income for people who pay into that pension scheme. It's not to support local and sort of national infrastructure, in my view. Is there any sort of requirement or need for this committee to take a view on that, or is that something that's going to be just sort of done by the government? And, you know, is there any point in me sort of raising my concerns? I think there is a point. And again, in the paper, I agree with you, as does most of London. It is on, we're not using the exact argument that you're phrasing it as, but there's clearly, there's no direction to say a minimum of X must be in the UK, but they are expecting each funds to have a target for local elements, but it's not mandated. But we're even saying that for the London pool, it's very, very challenging. If you're in something like Brunel or your borders to the coast or your access, your regional landscape is broad. So local for that pool is vast. For London, it's very concentrated. So I think we need, Wales have been given a discretion for some of the stuff. London needs to be at the very minimum given a discretion on what local means. But we're pushing for local to be UK, and there's no pre-mandated target on where it is. So we're focusing on that, because you're not going to be told you have to have 10% in it. But even UK, I mean, there's a whole world of investments out there, and surely the duty of a manager of a pension scheme is to select the best choice of assets to invest in that will give the best returns for that scheme, given the objectives, rather than what's going to support the national infrastructure. You know, that's clearly the most efficient way to invest, I would have thought. I don't know. Perhaps the expert can tell. Isn't that precisely what's happened in Canada, that we've noticed that Canadians are investing in here because they've consolidated their pension fund? Is that correct? Okay, I'll just make a couple of comments there. I completely agree with the point about local, that it should be defined as UK. But crucially, it's just a target that you can choose to set. So under that mandate, you would not be required to invest in the UK. You would only invest in the UK if you could find investment opportunities that met your objectives and the risk return requirements. So I think that basically the previous pooling consultation, which had this to have an ambition, I mean, it's just have an ambition and UK, local can be UK or local up to you. I think that's a far better approach that enables you to still discharge your fiduciary duty. And on Canada... When you say you... No, no, no. The consultation's clear that they're saying the committee would set, you would set your target for local investment. And that could be zero, I think, in theory. Yes, that's my interpretation. If you look at paragraph 27, if you go to that, these are the four areas. And we're talking about local, so this is where it picks up. So there's four bullet points in where I'm saying about the focal point of where we are seeking to have the core main change. And it's recognised that the government has a desire to increase local investment. That's all it is. It's a desire. It's an implementation. It's not mandating anything. So I'm not massively concerned. However, what we are saying is if they do want to prescribe something, we know we're setting the landscape for future direction. So for that reason, that's why we're saying, therefore, the group want to encourage investment in London. Whilst it might be a preferred option, for us, local should be continued to be determined to be the UK. Because clearly, if you are going to have an investment, and it was going to be around here, that's going to ensure that there's more affordable houses being built, then clearly it would be advantageous. If the investment was sound, and it was local to our local area, then clearly we'd all want that. But we know that's unlikely that that's going to happen, so we need that remit to be much broader. It sounds like we are going to have this debate, but not yet, for this committee. So there's probably not a huge point in debating that. Exactly. So it's not mandated. It's in there. We are going to have to set some agenda, and that would be determined by yourselves as a group, as to what you wanted. It could be zero. And then if you're having that, then no doubt you may get some challenge as to why it's – because you have to articulate why. We are going to be encouraged to work with where you've got local mayors and stuff like that, work with them, and we'll be needing to work with the GLA. One of the things that we're not really talked about here, but will be much broader, we've got the largest local government fund in London. It's not actually part of the pool. You've got the LPFA, you know, who are separate from that, who are in LPP. So what sort of collaboration are we going to do? If we were to do things locally, then surely it would be more in collaboration with others. So on that aspect, again, that reiterates my point about why locals should be UK, and I think as a group of London officers, we're supportive of that. So I'm unconscious of time and everything else. And so if you look at where we're focusing on – so we talked about the active versus passive, mainly being the core one. But in saying that the other areas we've talked about, you know, timelines, what you mentioned, Councillor Caddy, about the liquid stuff, that's not as much of a concern. It's more the private market mandates, where in reality you're not going to be able to have those transferred under direct control. But there are pragmatic ways of delivering that, and we just need the government to recognise that and work in collaboration, whereby there might be a management oversight on how they're operated, rather than those assets physically transferring under the name of the sieve. And to be fair, the sieve agree fully. I mean, obviously you've got Rob and Sylvia, who you can ask them some questions on that later as well, when they're sat here. But they will tell you the same as well. It's working closely together. And then the final point, which we talked about with Councillor Diffordham, if you look at – so the questions 27 and 28 is on some of the elements of governance, but it's so weak. It's only talking about the two members which we currently have. It needs to have that – you know, a much stronger contract management arrangements, where there are proper formal processes to enforce that change, if the pool is – you know, bear in mind the pool is the only vehicle that we have to manage over £3 billion worth of our assets. So, like I said, I'm genuinely saying that I don't think at the moment the way that the group that there is within the pool themselves, that we would find ourselves in a situation where we are at loggerheads and we couldn't get a resolution. We've seen the evidence of that already with the bio-maintain. However, we want to protect for the future, and we want to make sure that if we are now only going to not have the ability to do the comply or explain, because we have – we've lost that, we must have some element of control and some element of comfort that there is a dispute resolution. That's not to say we'll get our own way, but there has to be – if we're at loggerheads it's that someone independent looks at it and finds a resolution rather than just being told, you know, suck it and take it, which is what it is currently phrased, not in those words, but that's what we'll be faced with, because we have no other alternative. Thank you for that couple of points. For me, the easiest solution to that last one would be just create a market between the pools, allow us to transfer out. Rather, if you're going to incentivise managers to do a good job, you could have checks and balances and all sorts of complicated institutional arrangements, or you can just say, as a body, we could skip into a different pool. If our local pool lets us down, we'll move to another one. It means they don't have to create a load of complicated institutional solutions, but they're not going to do that, I appreciate it. Question A, should that be insufficient on that first sentence there? There's concern the pools will have sufficient capacity, is that insufficient capacity? Probably, yes. And on that point, is the CIV getting more money, so they can manage this influx of capital and complicated things they're going to have to manage? Well, any money that they get will be from the 32 funds. There have been some questions that have been raised, and the Section 151 Officer at Bromley is very vocal on this particular point, and he'll be very aligned with Mr. Turner. He's raised it directly with the Treasury and Ministers, but I've been at meetings as well, and never really got a response. So, they no doubt will be coming with a business plan to suggest how, for what they're being asked to do, they need more resource. I don't think any one of us would want them to try and deliver what they're being asked to do. And these are tight timelines in local government land. They are, and that's why I said about when we talk about the transition, about what comes across, it will be pragmatic, I hope. Currently, the proposals that have been laid out by the CIF are sensible, and, you know, we don't know what the final, what it's going to actually look like. This is still part of the process of coming back with some formal guidance. But March 2026, they will not have 100% of assets directly managed by them. There will be this oversight arrangement, even for the liquids. I mean, we're in a very strong position because most of ours are with them elsewhere. Many funds don't. And I, you know, I can't speak for the CIF, but I, you know, but what they have, when they've outlined what we're looking at doing, it is doing a smooth transition across, with oversight being fundamental rather than necessarily direct ownership sitting under that umbrella of, it sits in one of their funds, because that can't be done in 15 months. In the interest of time, that's okay. Yes, I mean, this is the quarterly paper. I'm not going to really talk about it too much, in the sense of that it's opened up really, really straight to questions. And I would say that we, you know, just to note that the London CIF have got their own presentation on some of this when we're into the closed session, so you may well wish to reserve some of your questions until later on, when they're able to give you honest and open, frank conversations that you, that, you know, with, which we might have some commercial sensitivity to them, which is why they can't be discussed in this forum, but they can be discussed later on on the agenda when they've got their own presentation from them. But if you've got any questions from myself or from, from Tony in relation to the, how the market is in general, then this is probably the time to ask on this paper. It's keeping a close eye on that situation to make sure it's rectified. Item six, general matters. Mr. Gelotti. Okay. So as per normal, we'll, you know, if it's okay with yourself, Chair, we'll go through each sort of paragraph one by one, because they are sort of like unique, different little entities. So if we start off with what we've just been roughly talking around about the fit for the future consultation, which we've had a lengthy discussion on, part of that is that we would have to move the various different assets into, um, the, the sieve. So what you can see above really now is on paragraph, uh, three, it shows you the level of investments that are currently invested, uh, within, uh, the pool. Uh, you're, and as I mentioned before, we've got roughly 94% of our, um, liquid assets that are sitting, uh, inside. Um, the challenge we've got more with the, uh, the liquids is we have, um, some of our direct and closed and the directly, uh, um, and evergreen type solutions. And that is really JP Morgan. So the JP Morgan, if you recall, is an infrastructure mandate that doesn't have an end date, whatever assets are sold or they're recycled. Um, so there's no natural end date. More often than not, when it comes to the private markets, there is a finite period of time. So naturally as those, those monies would come back out to us, any new money would normally be now under current arrangements would be going into a sieve based product. Um, but we will have some challenges around how we overcome, uh, some of those directly managed that are evergreened, but we will be working with the sieve, um, during, uh, the next sort of 12 to 15 months before the March 26th deadline date comes across as to how those will be addressed. So I don't know whether or not anyone has any queries on that particular part of the paper. Just a quick question on the math. So if I can understand it, looking at that paragraph three, is it 94%? I think it's 94% of liquid assets. Oh, of the liquid assets. Yes. So the only, as I said, the only that are either directly managed by the, the pool or sit or, uh, uh, in our passive, which is overseen by the pool. So the LGIM, uh, mandate, our passive mandate isn't, uh, isn't a directly a, a sieve product, but it meets and fulfills the pooled requirements because they have oversight, uh, of it. So the only one which wouldn't meet the requirements is the Oak Hill mandate, uh, that's, um, sits within, uh, our, uh, allocation. Uh, just in paragraph six, it notes about staff turnover and that the sieve doesn't have a chief investment officer at the moment. So, I mean, is that still the situation? Is that a concern? Are they recruiting desperately? That might be a question you ask them when they're at the meeting later? Good. Yes. So, um, the next update is on our, uh, new Veeam property fund. Um, you will recall that we've had lengthy discussions over the options available for this fund. It's a very small fund for which we own, uh, in excess of 30% of, um, the underlying assets within it. Um, and obviously it's looking to go into wind down. We'd ask to find an alternative, uh, option and that would be concluded by out. So there has been ongoing discussions with, um, several third parties to come up with a preferred, um, bidder for it, which has been chosen. The problem that we, we have is like with many things when you're trying to, uh, uh, value, um, a property based solution that two different, um, values will come up with two different valuations. And that's what we've found, uh, ourselves in, uh, the position at the moment is that the Naveen's valuers are varying at X and the, uh, preferred bidder is coming in at Y and that difference is not within tolerance levels at the moment. So we are obviously having an ongoing, uh, discussion. So they've extended the period of time for which the fund, um, is held in abeyance. Um, and we need to look at what our options, uh, will, will be the problem we have with all of these again, doesn't tie in with the central government's agenda. And, you know, what is it that we want to try and seek to do? How do we operate? Do we, if we can't agree, um, do we then revert back to wind down, um, or do we accept that actually that the value that we would get, we were, had it priced into our fund was too high and it wasn't the real value. Um, you know, they're the options that we're looking to try to do. So there are two other LGPS, um, funds that are in this particular, um, mandate that I'll be liaising with, one of whom is actually another pool. Um, so we will be looking to, you know, and I will be engaging with, with those and bearing mind that the other pool has, um, shall we say property experts who can advise appropriately. So we've got some good, able to have some sound, you know, good soundboard where we'll try to come up with the right outcome. The problem with all of these is these decisions, uh, are made, um, not on those four days where you meet as a committee. So it's ensuring that I keep you abreast. And I had delegation up until the last decisions, but we, we thought we'd be in a, in a position to sign off. We're not. So I need to have that delegation extended. When is the kind of final, final cutoff line where we have to decide whether we're going to cut our losses or? Um, realistically it should be before next committee. I think we've, we've got another one coming in, in this month where they will be looking to see whether or not they can come to a, a compromise. Like most of these things, there's always two sides to the, uh, to the equation. Um, you know, even with these tolerance levels and coming up with, um, uh, a median price, it means that the stakeholders of the other entity are going to potentially pay an inflated price to what their own value or things it's worth. So it's not just us, it's them as well. Are they willing to, to pay more than what they think they, they deem it to be? Um, but even with, even if we don't go ahead with this, it's not the end of the matter because we then have to go into a wind down and gradually those underlying assets would be sold and they'll be sold at a time when everyone knows that you need to sell because you're in wind down. Are you really going to achieve the optimum value? Um, and no one's got a crystal ball. So that's the dilemma that we're, we're looking at. In reality though, it is most, we are the largest, um, owner of that fund. Our investment is small in comparison to the fund value, looking at about 40 million pound investment for a 3.2 billion fund. If we do end up losing 10%, it's four, four, you know, it's been overpriced. It's four million in that wider scheme. So clearly we're going to advocate and push for the best that we can get, but in the scheme of things, it's not material. Um, yeah, thank you. Um, we've discussed, uh, in the past about climate, uh, reporting and I know there's a bit of training that was going on about options and about direction on it. So I don't know whether or not there was any questions you wanted to raise on climate reporting in this session. Um, yeah, I know, um, we don't have an answer yet to what it, what it's looking like, but I wondered whether we might do in time for 13th of February, which is the next environment committee meeting on, on what, sorry. Curious set of, uh, you know, uh, progress. Am I right? Um, so officers are working to compare the reports and check this. We can still provide the, um, information. When do we think we might have that accurate information? Um, yeah, sorry. I mean, what we're looking at trying to do, this isn't something that we, we marry off. We, we, we're looking to do every three years. We're looking to do, we, we were, we were going to do in line with our asset allocation, do a full review. We have got some new data where we've asked the CIV to, to provide for us. Now the CIV use different metric and do use a different provider to that of what Mercer has, has done. So if on the long-term projection, bearing in mind what we talked about, who's going to be responsible for what going forward, we might need to rebase some of our stuff and looking at to what the CIV can potentially provide for us. That's not something that's not going to be done by February. This is something that needs to be a proper measured approach around about how we look to, to, to go in, in the future direction of what we're seeking to try to do. And there could well be other metrics that we would, may want to consider going forward as was discussed in the training session around other options about what we could be looking to liaise with the CIV, um, to do, take, to take it forward. Then on the update on, uh, responsible, um, investments at the, obviously at the last meeting, we had the petition and we would looked around what, what could we do and how best place could we look to try to look around our humanitarian approach to, to investing, uh, and having a much more responsible investment strategy. Um, now we, we talked about potentially having certain options at some point could come back because at that stage when we did it, you still had the option of comply or explain. You've now seen in the paper today that that is gone. So the only option that we're going to have going forward is finding the right strategy cutting across London. So it is not going to be pragmatic to really bring anything back here until we know the outcome of the consultation and then can work across our London peers to provide various options as a group. We can then bring those options back to, to it, but I'm afraid us being ones with the loan is no longer on the, um, viable because you won't have the comply or explain, um, option available to you. So, uh, I think the point then is we need to, um, uh, note the updates provided in this report and specifically we should delegate authority to, uh, Mr. Jossi and the director of financial service to vote on the Nuveen UKPF merger. If a vote is required before the next meeting of this committee, we all agree. Thank you very much. And so item seven communications policy review. Okay. This could be really nice and brief. Hopefully. Um, it is here for review. Um, like anything, um, you, we should be, you know, looking at our, uh, policies and updating them as appropriate on a regular basis. That's normally done within every three years. Um, the officers, um, responsible for the administration of the scheme. We've re-looked at the policy, considered it, and there were only a few minor changes need to be updated to reflect, uh, changes in designations. Um, it was deemed that the overall, uh, policy was fit for purpose. Um, so it's laid here before you, uh, for approval on that basis. Are we all agreed? Thank you. Um, item eight, um, we need now to move to excluding the press and public for any members of the public who may be watching. Um, this is a very normal when we are asking, um, fund managers to present to us that they can do so in privacy, um, because some of the matters may be commercially sensitive, uh, and therefore, uh, we're asking the committee to agree to pass a resolution as follows to decide having regard to the particular nature of the business to be transacted, whether or not to exclude the press and public during consideration of item nine on the grounds that they are likely to disclose exempt information by virtue of paragraph three of part one of schedule 12a as amended of the local government act 1972. Are we agreed on that one? Thank you very much. Um, if you could now. Thank you very much.