Border to Coast Pensions Partnership Ltd

Transcription

1 Border to Coast Pensions Partnership Ltd Manager Day June 2018

2 Purpose of today 1. To update you on progress at Border to Coast 2. To outline the timing and details of the first Sub- Fund launches 3. To set out our approach to manager selection and what you should expect 4. To answer your questions 2

3 Border to Coast Pensions Partnership 12 Likeminded Local Government Pension Funds c. 50bn Assets Under Management Internal & External Management 3

4 Border to Coast: the story so far Phase 1: establishing pool and guiding principles Phase 2: Govt approval, funds commitment and building blocks established by project team Phase 3: transition to permanent team and building Border to Coast Jan 2015 July 2016 July 2016 Dec 2017 Dec 2017 Guiding principles 1. Meet Government aims (governance, RI, VFM and infrastructure) 2. One Fund, One Vote 3. Funds retain governance role and ownership of asset allocation 4. Generate improved net of fees risk adjusted performance 5. Internal management capability 6. Improved resilience and capacity over existing structures 7. Shared team in one location (Leeds) 4

5 Border to Coast: Why Are We Here? Making a difference to investment outcomes for Local Government Pension Funds through pooling to create a stronger voice; working in partnership to deliver cost effective, innovative, and responsible investment now and into the future; thereby enabling great, sustainable performance. 5

6 Border to Coast: What Do We Want To Be? Collegiate a collegiate organisation: working together in an open and trusting environment with shared vision and goals to deliver long-term, strong and sustainable outcomes for customers; Transparent Customer owned, Customer focussed Sustainable a sustainable organisation: investing in our colleagues by facilitating work-life balance; by encouraging personal and professional development; and supporting a creative, flexible and open to change culture that is equipped to evolve new capabilities as customer needs change; a transparent organisation: maintaining customer and public trust in Border to Coast s integrity to enable us to deliver our objectives. 6

7 Border to Coast: progress in 2018 Milestones achieved FCA authorisation (FRN ) and ACS approval (PRN QIS suitable for professional customers only) in place Board and senior management team appointed New office established Toronto Square, Leeds TUPE integration of internal teams under way Transition and Manager Selection Advisers appointed Next steps in 2018 First internally managed Funds to launch in July First externally managed Funds to launch in October Private markets structure planned for Q

8 Border to Coast: Board Chris Hitchen Enid Rowlands Tanya Castell Chairman Non-Executive Director Non-Executive Director Rachel Elwell Chief Executive Fiona Miller Chief Operating Officer 8

9 Border to Coast Pensions Partnership Ltd Investment Team John Harrison

10 Creating our new Investment Team Build on what was there already Experienced investment professionals Broad range of asset classes Strong track record for internal capabilities Consistent approach and long term perspective Future opportunities Larger team with greater research capability Additional focus on external manager capabilities Enhanced risk disciplines and awareness 10

11 Investment Team structure end 2018 CIO Head of Equities and Alternatives Head of Strategy and Fixed Income Head of External Management Head of Research Portfolio Managers Equities (7) Alternatives (4) Portfolio Managers (2) Portfolio Managers (4) Head of RI Economist Research Managers (2) Portfolio Risk Manager Assistant Portfolio Managers (4) Research Analysts (4) 11

12 INDICATIVE Potential Development of Sub-Funds* * Subject to Partner Fund requirements = Potential external manager mandates 12

13 Border to Coast Pensions Partnership Ltd Externally Managed Funds Graham Long

14 Existing Active UK Equity mandates End Mar 2017 Mandates Target vs index Size Cumbria One +1% pa 241m North Yorkshire One +3% pa 304m Surrey Two +2% pa +2.5% pa Tyne & Wear Warwickshire Total Two +2.5% pa +4% pa 684m 632m One +2% pa 283m 2.1bn Seven mandates - all use FTSE All Share benchmark Five mandates with net of fees performance targets between 1.75% and 2.25% pa closely aligned with Border to Coast Sub-Fund Two outliers one lower risk and one higher risk 14

15 UK Listed Equity Alpha Fund Starting AUM: 0.8bn 1.2bn (est) subject to Partner Fund asset allocation decisions Manager numbers: 3 Benchmark: Performance Target: Risk: FTSE All Share Index +2% pa rolling 3 years (net of manager fees) 2% to 5% tracking error 15

16 Existing Active Global Equity mandates 18 mandates; 17 managers Broad range of benchmarks some blended reflecting range of manager benchmarks Two use inflation plus benchmarks Outperformance targets between +1% and 4% pa; higher for inflation plus 16

17 Our Objectives We want to achieve Long term net of fees outperformance Blend that improves risk adjusted returns Long term partnerships; success is not having to change managers Integration of RI We want to avoid Restricted opportunity set no consultant buy lists Over diversification; blends that reduce risk adjusted returns Frequent (costly) manager changes Higher overall costs than before pooling 17

18 Responsible Investment Why it matters to us Sustainability at core of our corporate and investment culture Effective stewardship drives better returns We will exercise voting on internal and external mandates We need from you Evidence of ESG integration Active engagement Quarterly reporting UK Stewardship Code, UN PRI or international equivalent 18

19 Selection Process Transparent, open and fair o OJEU principles compliant Three categories for scoring o Technical/quality assessing each manager o Complementarity assessing manager combinations o Value for money Complementarity in practice* Manager Weight (%) Return (% pa) Info ratio A B C Total 1.0 * Based on sample manager combination (Mercer) 19

20 Border to Coast Pensions Partnership Ltd Alternatives Mark Lyon

21 Key Aims of Structure INCORPORATE LEGACY ASSETS ECONOMIES OF SCALE ADAPTABILITY COST EFFICIENCY FLEXIBILITY OPERATIONAL SIMPLICITY 21

22 Relationships with Managers Types of investments Traditional GP/LP Co-investments Managed Accounts Club Deals/JVs We are looking for Partnerships Transparency New opportunities Knowledge Transfer 22

23 Investment process Investment Allocation Partner Funds Strategic asset allocation remains with Partner Funds Investment Selection Border to Coast Investment selection and portfolio structure determined by Border to Coast Due Diligence Border to Coast 23

24 Border to Coast Pensions Partnership Ltd Rachel Elwell

25 Disclaimer The material in this presentation has been prepared by Border to Coast Pensions Partnership Limited ( Border to Coast ) and is current as at the date of this presentation. This information is given in summary form and does not purport to be complete. Information in this presentation, including any forecast financial information, should not be considered as advice or a recommendation to investors or potential investors in relation to holding, purchasing or selling securities or other financial products or instruments and does not take into account your particular investment objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information having regard to these matters, any relevant offer document and in particular, you should seek independent financial advice. All securities and financial product or instrument transactions involve risks, which include (among others) the risk of adverse or unanticipated market, financial or political developments and, in international transactions, currency risk. This presentation may contain forward looking statements including statements regarding our intent, belief or current expectations with respect to Border to Coast s businesses and operations, market conditions, results of operation and financial condition, capital adequacy, specific provisions and risk management practices. Readers are cautioned not to place undue reliance on these forward looking statements. Border to Coast does not undertake any obligation to publicly release the result of any revisions to these forward looking statements to reflect events or circumstances after the date hereof to reflect the occurrence of unanticipated events. While due care has been used in the preparation of any forecast information, actual results may vary in a materially positive or negative manner. Forecasts and hypothetical examples are subject to uncertainty and contingencies outside Border to Coast s control. Past performance is not a reliable indication of future performance. The information in this presentation is provided as is and as available and is used at the recipients own risk. To the fullest extent available by law, Border to Coast accepts no liability (including tort, strict liability or otherwise) for any loss or damage arising from any use of, or reliance on, any information provided in this presentation howsoever caused. Suitable for professional clients only; regulated by the FCA (FRN ) 25