Agenda item

This report summarises the background to pooling and the Fund’s response to various issues arising therefrom. It also includes and introduces a presentation to be made by the London Collective Investment Vehicle (the London CIV) as a briefing for London local authority elected members on the ongoing development of the London CIV.

The Head of Pensions and Treasury introduced the item and explained that Dean Bowden became the CEO of the London CIV in December 2022.

Dean Bowden, CEO of the London CIV explained that he joined in 2022 and this was his first appearance at the Committee. The London CIV was an extension of the funds they represent and sought to deliver value and achieve outcomes. Dean Bowden explained that the business was in a lull regarding its capital position, this had been addressed and they had regulatory capital. Dean Bowden explained that he had looked at the business as a whole and found that there were many inefficiencies, the London CIV had implemented a recruitment freeze as they wanted to ensure they got the most efficiency out of the structures that were in place, removed duplication and reduced the discretionary funding charge (DFC); the DFC would be reduced again next year with a view to eventually removing it entirely in the next two or three years. The London CIV had launched UK housing and the buy and maintain credit fund, Dean Bowden believed that the buy and maintain credit was going to be the most successful launch they've had on an assets gathering basis purely because of the number of boroughs and clients that had asked for it.

Dean Bowden stated that last year was a foundational year, they had received clarity from government regarding the consultation and the overall funding model would be simplified, they looked at product offerings.

Dean Bowden explained that TNFD would come to the fore which was reporting service which would be offered for free once it had been rolled out.

Dean Bowden informed the Committee that he had spent time in workshops with officers and Ministers and there was a desire to push forward with the pooling and to use the capabilities of the community to invest in infrastructure assets. This would ensure that less intervention was required moving forward.

Dean Bowden stated that the Government had set a deadline to transfer liquid assets to pools by March 2025, but the London CIV had responded stating that this was ambitious.

In response to questions from Members officers informed the Committee that:

• There were investment advisors who would have a view on what asset classes were required. They would also have their own opinion on which asset classes were worth investing in and they would work collaboratively to ensure that the best practices were implemented. It was important to work as a community.
• The lift and shift would be in liquid assets to start with. For illiquid assets the transition costs of moving between holders would need consideration. For property assets, they would use a model portfolio strategy rather than a fund-based strategy as they would be able to shift the oversight of the manager to the London CIV without changing the ownership of the underlying asset.  The model was not to have the fund managers who worked in the field of the business, but they would be able to review the managers who knew the business area.
• The London CIV would negotiate on behalf of a collective rather than a singular which is what would drive down the cost of an asset manager.
• There were 44 employees at London CIV across 5 functional teams, 15 members of staff were on the investment team and monitored the investments on the funds’ behalf full time. This was a more structured way to monitor investments. As the London CIV was catering for their shareholders as well as their clients they had to go above and beyond to ensure that the asset managers were well scrutinised.
• One of the values that the London CIV could drive for the community was Environmental, social, and governance (ESG) investments. The London CIV had a lot of engagement with partner funds on that topic, there was a Sustainability Working Group to which anyone within part of the funds was invited to attend. This was a quarterly session where they discussed what was important from an ESG perspective to partner funds, what values and issues were pressing as well as discussions about best practice.

Resolved:</AI3>

1.1 To note the contents of this report and the attached briefing provided and presented by the London Collective Investment Vehicle.