Insight Exchange: Julian Brown

Written By: Aoifinn Devitt
Independent Investment Adviser

LAPF Investments speaks with Aoifinn Devitt to discuss some of the issues shaping the sector

Aoifinn has advised LGPS pension schemes since 2006, consulting on asset allocation and responsible investing, as well as the pooling process. She is currently independent adviser for Torfaen, South Yorkshire, Berkshire, and on the investment committee of SAUL. Aoifinn is also senior investment adviser at Moneta, where she is responsible for leading the team’s overall investment efforts.

Originally from Ireland, Aoifinn began her career in London as an investment banking associate at Goldman Sachs International and a specialist consultant at Cambridge Associates Limited.

 

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?
The key issues are scrupulous efficiency in driving returns, and using the now mandatory scale at the pool level to procure and deliver the best tech solutions that are fit for purpose in delivering value for this client base. What do I mean by “fit for purpose” here? Solutions that can map the cash flow profile and projections of each member fund, and can determine an asset mix that is appropriate and can be modified if necessary if cash flow and/or return projections do not match their projections.

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?
Value for money means conserving every precious penny of the funds to ease the burden of employer contributions and bridge the funding gap if the fund remains underfunded, or fortify the buffer where funding exceeds 100%. But it is not just about driving down fees – the focus should be on returns net of fees, and apportioning fees where value is delivered. Ideally more scale should cut redundancies, drive efficiency in process, and ensure that the best possible service is delivered where it is needed by the partner funds.

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?
Again, scale will be critical here, to ensure that local investments get meaningful levels of investment, so this means that ideally partner funds should collaborate in prioritising investment goals. All of the areas noted are in need of investment, but as it is critical to have an eye on returns, I believe that local infrastructure improvements can leverage the skillset of local councils to make the most immediate impact. Targeted clean energy investments can sit alongside UK infrastructure as a high priority area. Housing is potentially more fraught from a returns perspective and experience has been mixed to date.

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?
This can occur on many levels – at the administering authority level it can mean removing redundancy in processes such as producing the risk register, ISS, FSS, Responsible Investment Policy and reporting, while at the pool level it can mean using the tech stack to streamline the understanding of risk, cash flow projections, compelling return streams and solutions such as currency overlays, through to ensuring that the LGPS has a critical seat at the table within the asset management industry.

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