Insight Exchange: Jason Fletcher

Written By: Jason Fletcher
Senior Consultant
JMJ Partners

LAPF Investments speaks with Jason Fletcher to discuss some of the issues shaping the sector

Jason is currently senior consultant at JMJ Partners. He has 25 years of executive experience at three of the UK’s largest pension funds (BA, USS and WMPF) and two LGPS pools (LGPS Central and the London CIV). Prior to JMJ Jason was a director and chief investment officer of London CIV. He has wide-ranging experience establishing, leading, and developing financial organisations in both the private and public sectors. Jason has a pragmatic approach to adding value, improving social and climate outcomes for organisations through impact investing, sustainability, mentoring people and managing change.

 

With LGPS consolidation now being taken forward, what are the key issues that need to be addressed to help consolidation deliver the best outcomes for the LGPS?
Firstly, manage transfer costs of between 0.5% for listed and up to 7% in private markets (including 5% stamp on property). Secondly, we need to ensure that the pools have sufficient resource to select and steward (oversight, advice and fiduciary) assets. Next, decide whether it should be managed in-house or external/OCIO. Rule of thumb: do it internally where it can be done better and cheaper. Finally, who is going to take responsibility for legacy assets that can’t be sold or pooled?

Value for money is a major theme in the bill. What does value for money mean in the context of the LGPS and where can LGPS funds and pools look to maximise value?
VFM is delivering long-term future outcomes which is something we can only estimate up front. Focus must be on the probability of meeting expected net returns through robust due diligence and ongoing monitoring. Too often investment cost (known up front), manager expected returns (TWR versus IRR) and the analysis of ESG, reporting and service levels are used as probability proxies, none particularly good predictors of risk adjusted outcomes.

The bill encourages LGPS investment in UK growth. What types of local projects should be prioritised, and what support would help make them happen? What types of investment would make the biggest impact?
Priority should be for local venture capital collaborating with our excellent education sector. Broadening the definition of productive additional private assets beyond Affordable housing, infrastructure and green energy. Taking a building from 50-100% occupancy is an “additional” for return and the climate! Switch from unproductive Gilts into productive assets; more diversified risk, more return, and everyone is a happy camper. New fund structures need to support lower costs and greater liquidity. AI is a facilitator not an asset class.

The bill talks about “professionalising” the LGPS. What do you think that might look like in practice – and what changes might it mean for how funds and pools work together?
The challenge of fiduciary responsibility is key to alignment and being more professional. Ensuring that the people making the decisions take on ownership for their actions and are properly aligned. Taking responsibility when things don’t go as well as planned is a positive trait. Maybe the pools should combine their fiduciary and advisory capabilities to deliver for the LGPS funds that need it. This approach will deliver value for money without costly mergers and transitions.

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