Surrey County Council is one of the three founding schemes behind the Border to Coast Pension Partnership. Surrey’s strategic finance manager, pension fund and Treasury, Phil Triggs, tells Sebastian Cheek how the collective will work.
How did the Border to Coast Pensions Partnership come about?
This has been in the pipeline for a number of months and the writing has been on the wall as far as the requirement to pool nationally is concerned. Surrey was one of the funds which started early; we wanted to be in the vanguard, the forward army as it were. The liason started to take place between like-minded authorities in the summer. There was some talk among funds nationally and Surrey got talking with Cumbria and East Riding and that was down to being like-minded, knowing each other well, knowing that each of those funds has a good reputation, the same
investment ethos, approach to risk, the same approach to risk governance. Mark [Lyon, East Riding] has been in the LGPS for some time and Fiona (Miller, Cumbria) is more recent. We have talked in total to 12 other funds and of those, 10 are now with us. We have made decisions as to who we talked to, explained the approach, the ethos, the like-minded aspect and made
explorations as to whether we could work together. We are 13 funds with an asset total of £36bn. The funds are: Surrey, Bedfordshire, Warwickshire, Lincolnshire, South Yorkshire, North Yorkshire, Cumbria, East Riding, Durham, Tyne and Weir, Northumberland, Teesside and South Yorkshire Transport Authority.
The local authorities are spread across the UK then?
In terms of an approach that was not necessarily regional, it was a matter of the three founding partners getting together and then seeing if we could talk to other likeminded funds with a view to joining a pool that could reach the £25bn requirement. In the early days only being three funds with less than £9bn was of some concern but, as other funds gradually came on board, we
gained traction and then solid momentum as we reached the £25bn criterion mark and then moved on to £36bn.
What are the benefits of pooling for Surrey?
Firstly, being able to operate on a far larger scale, so moving from running a £3bn portfolio to a £36bn one. Certainly on the external manager negotiations, these are far larger portfolios so the opportunity for discounts on manager fees is entirely possible. On a prudent basis we believe we will make considerable savings on externally managed equities and on alternative investments.
The annual saving is much higher on alternatives (£18m – £36m) than listed assets (£12.3m – £12.9m) and in terms of annual savings we are looking at anything between £20m and £40m. The
running of the pool is prudently estimated to be about £11m a year. Not included in that at all are the efficiencies of transferring external managers to internally-run funds. This is for individual administering authorities to make a decision as to what they want to do, as we intend to offer a bucket of internal and externally run funds.
How will BCPP work in terms of who takes responsibility for investments?
You have an operator and an investment pool which will take the form of a collective investment vehicle (CIV). Both will be registered with the FCA and the operator will have the authority
to make decisions on manager selection, vehicles and structures. That will report to a supervisory entity or shareholder board which will have overall accountability to the individual partner
funds. In terms of the supervisory entity there will be 13 representatives – one from each of the administering authorities – and in terms of the executive body of the operator, that will be staffed by people appointed by the supervisory entity so there will be for example a CEO, CIO, COO etc. but how that will be made up is still to be decided.
