London CIV faces uncertainty as local authority fund ponders future

The RBKC pension fund’s strategy to invest mainly in passive tracker funds means the scheme has not taken advantage of the predominantly active investment opportunities offered by the London CIV, which oversees around £26.7bn on behalf of 32 London Local Government Pension Scheme funds.

Quentin Marshall, chair of the investment committee that oversees the council’s pension fund, told MandateWire that participating in the pool is now “a net cost” to the pension fund because it has not chosen to invest in those active funds.

Marshall said the potential exit from the London CIV would be discussed during the pension fund’s investment committee meeting on February 9. However, he added that the scheme may or may not make its decision that day.

Resourcing at the London CIV appeared to be in crisis and it was facing difficulties retaining or attracting suitable staff

London Borough of Tower Hamlets Pension Fund

Fears over staffing issues

The RBKC fund’s exit plans come after two other London local authority pension schemes raised concerns over staff retention at the London CIV.

The pool’s chief executive, Mike O’Donnell, is due to step down at the end of March after three years at the helm. In 2018, Julian Pendock left his post as chief investment officer after two years, followed by Mark Thompson, who unexpectedly resigned from the same role a year later. 

Minutes from the £1.7bn London Borough of Lambeth Pension Fund’s July 2022 pension committee meeting note that the scheme was planning to discuss the high staff turnover with the London CIV.

In its January 2022 meeting, the committee also requested that “inefficient use of multiple fund managers should be raised with the [London] CIV and relayed back to members”.

While the local authority did not immediately respond to requests for comment, a report prepared for Lambeth’s pension committee meeting on January 18 shows that scheme representatives were planning to meet with the London CIV’s new chief executive, Dean Bowden, as he prepares to contact “each individual borough to better understand specific needs”.

Previously, the £2bn London Borough of Tower Hamlets Pension Fund also raised concerns over the pool’s staffing issues, noting in its November 2019 pension committee minutes that “resourcing at the London CIV appeared to be in crisis and it was facing difficulties retaining or attracting suitable staff”.

The minutes also reveal that the committee was worried about the quality of monitoring reports, “which showed a limited ability to look beyond what [the London CIV] are being told by managers”.

Bad day for pooling

While the RBKC pension fund considers its future, one LGPS pool is advising the scheme against leaving the London pooling arrangement.

“If the RBKC choose to leave LCIV, and [theDepartment for Levelling Up, Housing and Communities] do not force them to join another pool, we believe it will be a very, very bad day for pooling indeed,” says LGPS Central, which has around £45bn in assets under management on behalf of eight partner funds.

LGPS Central points out that pooling is working for funds and administering authorities that have chosen to “embrace it”.

“Now is the time to be pushing forwards, not retreating backwards towards the fragmented, sub-scale and over-costed pre-2015 model,” it says.

If the RBKC pension fund exits the pooling arrangement, it could impact the London CIV’s aim to pool 70 per cent of the London LGPS funds’ total assets by 2025.

As at March 31 2022, 57 per cent of the London local authority funds’ assets had been transferred to the pool.

This article originally appeared on MandateWire.com