Agenda item

The Head of Business, Finance and Pensions updated the Board.

He reported that Brunel had appointed Legal and General as passive manager for the pool and were currently producing tenders for the UK equities and low volatility portfolios. A transition manager had been appointed and Analytics had been engaged as their strategic transition adviser, to ensure that they have an efficient process. There had been ongoing procurement for internal audit, tax advisory services and website provision, which would come to fruition over the next few months. They were now fully staffed, with a complement of 32 people. With regard to governance, a detailed report on all main activities would be made to the quarterly meetings of the Oversight Board, which will report cost savings. He had brought a sample copy of this with him, which Members could inspect if they wished. Brunel has produced its RI strategy. The next step would be the transition of the equity portfolios, followed by emerging market portfolios. The transition of complicated assets like private equity, property and hedge funds would take place from 2019. There would be a review of the business case in 2018. The asset transition plan had been received by the Investment Panel the previous day. The Panel would monitor its implementation.

The Chair asked Members how they would want this agenda item to be structured in future. Would they still be content with oral updates? A Member said that the role of the Oversight Board was crucial, and he asked whether Brunel’s report to the Oversight Board might be made available to the Pension Board. The Head of Business, Finance and Pensions replied that Members were welcome to inspect the sample report, but at present it would not be possible to routinely circulate the report to the Pension Board. The Member said that he would welcome a report showing before and after transition information for the Fund and comparative information about other funds, for example the level of passive management fees before and after transition, with explanations of why other funds were achieving better savings than APF, which had already realised substantial cost savings before transition. The Head of Business, Finance and Pensions replied that there would be much better information and more transparency once the Government fee cost templates were available. However, it would be extremely difficult to define a starting point against which changes could be measured. This was because in the past couple of years there had been changes to the strategic allocations of the Fund, LDI had been set up and so forth. What was now being transitioned was quite different from where the Fund was at the point the Business Case was approved.. The investment market was also rather fluid, as some investment managers were trying to reposition themselves as pooling developed, while others were not under the same competitive pressure to restructure their fees, and others again did not wish to be involved in pooling at all.

The Chair said that he was pleased to see that new reporting arrangements were being prepared. He accepted that the fluidity of the situation meant that some of the detail would probably not be available to the Board, but noted that the Panel were monitoring the transition. The Brunel accounts and auditors’ reports would be valuable sources of information for the Board.

The Head of Audit West suggested that it would help to avoid unnecessary duplication of scrutiny by the Board as well as by the Committee if this item continued to be an oral report.

The Chair said that the Member who had presented his apologies had raised a number of issues in an email to him. One of them was whether the LGPS transparency code had been adopted by Brunel. The Head of Business, Finance and Pensions confirmed that this was the case, and that it was the intention that all Brunel investment managers should do so.

RESOLVED to note the update.