Ian Scott is head of investment strategy at the £28bn Pension Protection Fund, which is no ordinary retirement scheme. He tells Mark Dunne about being back on the buy side, hedge funds, self-sufficiency, the trouble with infrastructure and what could lie ahead in the markets.
“We are playing an important role and the work that we do here across the board has a pretty big impact on peoples’ lives.”Ian Scott, PPF
How does it feel to be head of investment strategy at one of the UK’s largest pension funds?
It feels good. I have been on the other side of the fence, on the sales side, for about 23 years. Prior to that I worked for PosTel, which is the pension fund for the Post Office and British Telecom that is now called Hermes Asset Management. So I have come full circle back to pensions.
Having been on this side of the fence before, it wasn’t a surprise or a shock to see how things are on the buy side relative to the sell side. People moving one way or the other can often feel like things are different, but I haven’t had that experience coming back to the buy side.
When you took this position you told this magazine: “I love the idea that you get to test your knowledge and analytical ability against the market. Of course this can sometimes be a humbling experience, but more often than not, good thorough analysis wins out.” So, how have you found the first two years at the PPF?
I would echo those statements, every bit of them. It has definitely been a period where good thorough analysis has paid off. That has been our experience.
I have enjoyed putting some of the things I have worked on over the past 20-plus years into practice here. What I would add to my earlier statements is that the PPF is doing a good job and that it is a privilege to work for this organisation.
We are doing a good job. Could we improve certain things? I am sure that we can. Every organisation can. We are playing an important role and the work that we do here across the board has a pretty big impact on peoples’ lives.
What changes have you made on the investment side of the fund in your first two years at the PPF?
The majority of my responsibilities are on the growth portfolio side of things. We have built a lot of analytical tools that we use to help us manage the money. During that
period we have also in-sourced the bulk of the liability driven investment (LDI) portfolio. We have in-sourced our cash management, which is also part of my responsibilities. We have been more active on asset allocation as well.
Your directly invested assets grew to £28.7bn from £23.4bn in the year to 31 March 2017. How did you achieve that?
The bulk of the rise in the value of our assets has come through investment performance. We have schemes that transfer to us, so some of the growth is through the transfer of assets as well.
Equities have had a pretty good run. I wouldn’t describe us as having a lot of equities, but the performance of the equity portfolio within the overall portfolio has been good. So that has been very pleasing. When you look at our investment performance, we have exceeded our targeted returns over the rolling three-year period that ended last March.