Hugh’s November blog

22 Nov 2016 Hugh’s November blog

On 2 December we’ll reach the first anniversary of our first sub-fund opening, which is a bit disturbing on two fronts. First it seems like only yesterday we celebrated its opening, and second it means it’s almost Christmas again. On the other hand a huge amount has been achieved in the last twelve months with four more sub-funds opened, systems and processes being bedded in and refined, and new colleagues joining the team.

Team

On the subject of new colleagues; Ritika and Ryan joined us in August as investment analysts. Sadly Ritika then became our first departing colleague as her husband landed his dream job in Denmark. We’re back out in the market to recruit a replacement, but this will obviously take a little while so it’s likely to be the New Year before we refill the post.

Fund launch

We’re on track to open our next sub-fund on 16 December. The London CIV NW Real Return sub-fund will be managed by Newton Investment Management. Combined with subscriptions from Redbridge, Camden and Enfield into the LCIV Global Alpha Growth Fund (managed by Bailie Gifford) we will have £3 billion in assets under management before Christmas.

In the New Year we will be pressing on with opening two more sub-funds, a global equity fund again managed by Newton, and a UK equity fund managed by Majedie Asset Management. Furthermore, we are still optimistic of launching the Longview global equity fund.

Global equity procurement

With the first phase of our fund development coming to an end (the ‘lifting and shifting’ of existing borough investments) Julian, Jill and the rest of the investment team have been phenomenally busy over the past few months working on our first search and selection process aimed at opening an entirely new range of global equity sub-funds in 2017.

We received over 200 submissions leading to 58 fund manager interviews over the last few weeks – you can read about the outcome of this in more detail here. Vital support has been given by a sub-group of the Investment Advisory Committee (IAC) and we thank Debbie Drew (Waltham Forest), George Bruce (ex-Tri-Borough), Paul Guillotti (Wandsworth), Kate Limna (City of London), Rachel Cowburn (Hackney), Jeremy Randell (Kingston), Paul Reddaway (Enfield), Bola Tobun (Tower Hamlets), and Sian Kunert (Hillingdon) who spent many hours working on everyone’s behalf to ensure a great range of managers are going forward to the final selection stages.

Stakeholder audit

I’d like to thank all of you who spent time to contribute to our recent stakeholder audit. On the whole the feedback was very good, but inevitably there were a number of comments about things we can improve. This newsletter was highlighted as a key part of the overall communications package, and we’ll give it more focus in the future to ensure that we publish more regularly. Beyond that we will be developing a communications strategy aligned with our business plan for the next three years to ensure that all of you are kept more in touch and up to date with what we are doing.

Regulatory

Without wishing to finish on something too tedious, I recently attended an LGA organised meeting to discuss the impact of the Markets in Financial Instruments Directive (MiFID II) on local government.

MiFID II comes into effect on 3 January 2018 and one of its most significant impacts for all of us will be to downgrade the ‘professional investor’ classification of local government to that of ‘retail investor’ for all investments (pension fund and treasury). The FCA were clear at the meeting that they intend to press ahead with implementing MiFID II and have recently published their third consultation paper (CP16/29). Together with colleagues in the IAC we will be advocating for change to the FCA’s proposed criteria for local government to “opt up” to professional status as the proposed criteria don’t work.

On the other hand it’s not all bad news from the FCA; we got an honourable mention as a case study in their recently published Asset Management Market Study (see page 71), with the FCA stating “It is likely that smaller pensions schemes could achieve significant cost savings from consolidating their assets. LCIV is an example of the kind of benefits that can be achieved”.

My last blog finished by wishing you all a good summer; on the basis that this will be the last newsletter of 2016 I guess I should finish it by wishing you all a very happy Christmas and great New Year.