LGPS Central Limited Update on Joint Committee Meeting
The classified as confidential Joint Committee Meeting of LGPS Central Limited took place on 14th February 2020, with updates on investment performance, key performance indicators, and client satisfaction. LGPS Central has launched 9 funds, totaling almost 20 billion assets under management. Performance summaries for various funds were provided along with an introduction highlighting recent launches and collaborations. Detailed information on Passive and Active fund performances was shared.
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Classified as Confidential Joint Committee Meeting LGPS Central Limited Update Staffordshire Joanne Segars Chair Mike Weston Chief Executive 14th February 2020 LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 1
Classified as Confidential Agenda 1) Introduction 2) Investment Performance Summary Investment Performance ACS Passive Funds Investment Performance (Detail) ACS Active Funds Investment Performance (Detail) (Detail) LP Private Equity Performance Investment Performance Conclusions 3) Key Performance Indicators (Client focus) 4) Client Satisfaction Survey - Highlights LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 2
Classified as Confidential Introduction LGPS Central, has now launched 9 Funds (7 ACS, 2 LLPs) This includes the most recent launch of the 1bn+ Global Investment Grade Corporate Bond Fund Assets under the stewardship of LGPS Central Limited total almost 20bn. Nearly 11bn of this is in pooled funds, representing 23% of total Partner Funds assets. All 8 partner Funds within the Central Pool have now invested in at least 1 of the LGPS Central Funds We are grateful for the support and collaboration of our Partner Funds, Elected Members and Pensions Officers. LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 3
Classified as Confidential Investment Performance Summary ACS Funds FUND (ACS-PASSIVE) INCEPTION DATE TOTAL POOLED ASSETS UNDER MANAGEMENT PERFORMANCE SINCE INCEPTION (%) BENCHMARK SINCE INCEPTION (%) RELATIVE Vs. TARGET (%) TRACKING ERROR WITHIN TRACKING ERROR (%) LGPS Central UK Passive Equity Fund Apr-18 1,148.0m + 8.98 + 9.00 -0.02 0.12 Yes LGPS Central Global (Ex UK) Passive Equity Fund Apr - 18 2,193.2m +10.65* + 10.59* +0.06 0.04 Yes LGPS Central Global Passive Equity Dividend Growth Factor Fund Apr-18 525.9m + 14.61* +14.68 * - 0.07 0.05 Yes LGPS Central All World Passive Equity Climate Multi Factor Fund Oct-19 2,143.9m + 3.32 + 3.23 + 0.09 0.07 Yes FUND (ACS-ACTIVE) INCEPTION DATE TOTAL POOLED ASSETS UNDER MANAGEMENT PERFORMANCE SINCE INCEPTION (%) TARGET SINCE INCEPTION (%) RELATIVE Vs. TARGET (%) BENCHMARK SINCE INCEPTION (%) RELATIVE Vs. BENCHMARK (%) LGPS Central Global Equity Active Multi Manager Fund Mar-19 2,388 million + 13.66 +15.41 -1.75 +14.20 -0.54 (B mark +1.21%))** LGPS Central Emerging Markets Equity Active MM Jul-19 626.2 million + 0.25 + 1.58 -1.33 +0.68 -0.43 (B mark + 0.90)*** All figures as at 31st December 2019 *Benchmark net of Tax **Benchmark +1.5% per annum (adjusted) ***Benchmark +2% per annum (adjusted) 4
Classified as Confidential Investment Performance Summary LP Funds (Private Equity) FUND (LP) INCEPTION DATE TOTAL POOLED ASSETS UNDER MANAGEMENT PERFORMANCE SINCE INCEPTION (%) BENCHMARK SINCE INCEPTION (%) TARGET SINCE INCEPTION (%) RELATIVE Vs. BENCHMARK (%) RELATIVE Vs. TARGET (%) LGPS Central PE Primary Partnership 2018 LP Jan-19 150m Not meaningful 9.5% 13.5% Not available Not available LGPS Central PE Co- Investment Partnership 2018 LP Jan - 19 157m 8.2% 5.7% 9.7% 2.5% -1.5% Source: LGPS Central Limited *All figures as at 30th September 2019 LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 5
Classified as Confidential Joint Committee Meeting Investment Performance Colin Pratt Investment Director, Manager of Managers Jaswant Sidhu Senior Portfolio Manager, Private Equity David Evans Investment Director, Passive Equities LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 6
Classified as Confidential ACS-PASSIVE FUNDS (Data as at 31st December 2019) LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 7
Classified as Confidential LGPS Central UK Passive Equity Fund 12 10 8 Performance (%) 6 4 2 0 -2 LGPS CENTRAL FUND BENCHMARK -4 LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 8
Classified as Confidential LGPS Central UK Passive Equity Fund FUND (ACS-PASSIVE) INCEPTION DATE TOTAL POOLED ASSETS UNDER MANAGEMENT PERFORMANCE SINCE INCEPTION (%) BENCHMARK SINCE INCEPTION (%) TRACKING ERROR (%) RELATIVE Vs. BENCHMARK (%) WITHIN TRACKING ERROR? LGPS Central UK Passive Equity Fund Apr-18 1,148 million + 8.98 + 9.00 0.12 -0.02 YES INVESTORS (2) AMOUNT ( m) West Midlands 1,134 Highlights & Outlook Nottinghamshire 10 Key Tracking error of 0.12% well within expectations Performance is in line with benchmark Small cap stocks represented by exchange traded fund (ETF) As at 31 December 2019, ETF represented 3.5% of total fund Total of 351 individual holdings Largest holding HSBC at 5% of total fund Performance Indicator LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 9
Classified as Confidential LGPS Central Global (Ex UK) Passive Equity Fund 16 14 12 Performance (%) 10 8 6 4 2 (*Benchmark net of Tax) LGPS CENTRAL FUND BENCHMARK 0 -2 LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 10
Classified as Confidential LGPS Central Global (Ex UK) Passive Equity Fund FUND (ACS-PASSIVE) INCEPTION DATE TOTAL POOLED ASSETS UNDER MANAGEMENT PERFORMANCE SINCE INCEPTION (%) BENCHMARK SINCE INCEPTION (%) TRACKING ERROR RELATIVE Vs. BENCHMARK (%) WITHIN TRACKING ERROR? (%) LGPS Central Global (Ex UK) Passive Equity Fund Apr - 18 2,193 million + 10.65 + 10.59 0.04 + 0.06 Yes INVESTORS (2) AMOUNT ( m) Highlights & Outlook West Midlands 2,183 Low tracking error of 0.04% Small outperformance versus benchmark since inception Benchmark comprises following four regions: o North America o Japan o Europe ex UK o Pacific ex Japan Total of 2,049 holdings as at 31 December 2019 Largest fund holding is Nestle at 1.49% of total fund Nottinghamshire 10 Key Performance Indicator LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 11
Classified as Confidential LGPS Central Global Passive Equity Dividend Growth Fund 20 18 16 14 Performance (%) 12 10 8 6 4 2 (*Benchmark net of Tax) LGPS CENTRAL FUND BENCHMARK 0 LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 12
Classified as Confidential LGPS Central Global Passive Equity Dividend Growth Factor Fund FUND (ACS-PASSIVE) INCEPTION DATE TOTAL POOLED ASSETS UNDER MANAGEMENT PERFORMANCE SINCE INCEPTION (%) BENCHMARK SINCE INCEPTION (%) TRACKING ERROR RELATIVE Vs. BENCHMARK (%) WITHIN TRACKING ERROR? (%) LGPS Central Global Passive Equity Dividend Growth Factor Fund Apr-18 525 million + 14.61 + 14.68 0.05 - 0.07 Yes INVESTORS (1) AMOUNT ( m) Highlights & Outlook West Midlands 525 Tracking error of 0.05% within expected range Fund marginally underperforming benchmark since inception Small underperformance largely result of short delay in holding Taiwan securities following initial transfer in April 2018 Benchmark comprises three regions, US, Europe & Asia Pacific Total of 194 holdings as at 31 December 2019 Largest fund holding is Phison Electronics at 0.98% of total fund Key Performance Indicator LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 13
Classified as Confidential LGPS Central All World Passive Equity Climate MF Fund 3.5 3 2.5 Performance (%) 2 1.5 1 0.5 LGPS CENTRAL FUND BENCHMARK 0 Oct-19 Nov-19 Dec-19 LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 14
Classified as Confidential LGPS Central All World Passive Equity Climate MF Fund FUND (ACS-PASSIVE) INCEPTION DATE TOTAL POOLED ASSETS UNDER MANAGEMENT PERFORMANCE SINCE INCEPTION (%) BENCHMARK SINCE INCEPTION (%) TRACKING ERROR RELATIVE Vs. BENCHMARK (%) WITHIN TARGET? (%) LGPS Central All World Passive Equity Climate Multi Factor Fund Oct-19 2,143.9 million + 3.32 + 3.23 0.07 + 0.09 Yes INVESTORS (1) AMOUNT ( m) Highlights & Outlook West Midlands 1,614 Tracking error of 0.07% well within range Small outperformance versus benchmark Fund launched on 24 October 2019 Outperformance driven by holding in Global ETF and underweight in restricted markets including Saudi Arabia Strongest factor exposure to quality and low volatility at 31 December 2019 Total of 956 holdings as at 31 December 2019 Largest fund holding is Apple at 2.6% of total fund Cheshire 529 Key Performance Indicator LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 15
Classified as Confidential ACS-ACTIVE FUNDS (Data as at 31st December 2019) LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 16
Classified as Confidential LGPS Central Global Equity Active MM Fund 18 16 14 Performance (%) 12 10 8 6 4 2 LGPS CENTRAL FUND TARGET 0 Inception Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 17
Classified as Confidential LGPS Central Global Equity Active MM Fund FUND (ACS-ACTIVE) INCEPTION DATE TOTAL POOLED ASSETS UNDER MANAGEMENT PERFORMANCE SINCE INCEPTION (%) BENCHMARK SINCE INCEPTION (%) TARGET SINCE INCEPTION (%) RELATIVE Vs. BENCHMARK (%) RELATIVE Vs. TARGET (%) LGPS Central Global Equity Active Multi Manager Fund Mar-19 2,388 million + 13.66 + 14.20 +15.11 - 0.54 - 1.45 INVESTORS (6) AMOUNT ( m) Highlights & Outlook West Midlands 882 Performance below benchmark, only Schroders (growth manager) have outperformed Harris (value manager) 6bp below benchmark. This is actually creditable given that growth has outperformed value significantly since inception. Not holding Apple (+64%) or Microsoft (+40%) has cost 1.9%. Union s underperformance is disappointing market rotation in early September was very costly. There have also been some stock errors. All managers behaving as expected and following their investment process Tilt towards value has been marginally negative, but is still favoured Staffordshire 563 Key Performance Indicator Leicestershire 379 Cheshire 279 Shropshire 265 Nottinghamshire 21 LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 18
Classified as Confidential LGPS Central Emerging Markets Equity Active MM Fund 2 1 0 Inception Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Performance (%) -1 -2 -3 -4 LGPS CENTRAL FUND TARGET -5 LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 19
Classified as Confidential LGPS Central Emerging Markets Equity Active MM Fund FUND (ACS-ACTIVE) INCEPTION DATE TOTAL POOLED ASSETS UNDER MANAGEMENT PERFORMANCE SINCE INCEPTION (%) BENCHMARK SINCE INCEPTION (%) TARGET SINCE INCEPTION (%) RELATIVE Vs. BENCHMARK (%) RELATIVE Vs. TARGET (%) LGPS Central Emerging Markets Equity Active MM Jul-19 626.2 million +0.25 + 0.68 + 1.58 - 0.43 - 1.33 INVESTORS (3) AMOUNT ( m) Highlights & Outlook Performance since inception 43bp below benchmark, but sub-fund has been running less than 6 months UBS performance has been strong (1.8% above benchmark), Vontobel are 40bp below benchmark but BMO down by 2.5% relative BMO s preference for quality had not paid off by the end of December. They tend to protect value very well in sharply falling markets so have an important role to play in a volatile asset class EM has underperformed DM by c. 1.7% since inception, despite strong December in both absolute and relative terms Performance of individual managers is likely to be variable, given their focused portfolios Worcestershire 348 Leicestershire 186 Key Nottinghamshire 92 Performance Indicator LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 20
Classified as Confidential LP PRIVATE EQUITY LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 21
Classified as Confidential LGPS Central PE Primary Partnership 2018 LP Current Investments FUND COMMITMENT DATE GEOGRAPHY/ REGION STRATEGY COMMITMENT AMOUNT (LOCAL CURRENCY) COMMITMENT AMOUNT ( GBP) STATUS Baring Private Equity Asia Fund VII Feb-19 Asia (including Japan) Mid-Large Buyouts $39,822,000 32.3m Live KKR Europe V Apr 19 Europe Mid-Large Buyouts 31,693,200 28.1m Live Blackstone Capital Partners VIII May 19 Global Mega Buyouts $35,677,600 29.0m Commences Q4 2019 Permira VII June-19 Global Growth 33,600,000 29.8m Live *All figures as at 30th September 2019 Fund Size: 150m Committed: 119.1m (79.4%) Committed & Reserved: 119.1m (79.4%) Source: LGPS Central Limited 22
Classified as Confidential LGPS Central PE Co-Investment Partnership 2018 LP Current Investments FUND COMMITMENT DATE GEOGRAPHY/ REGION SECTOR INDUSTRY COMMITMENT AMOUNT (LOCAL CURRENCY) COMMITMENT AMOUNT ( GBP) GFL & Waste Industries Apr-19 North America Waste Waste Removal & Disposal CAD $0.5m USD $26.1m 21.7m Transporeon Apr 19 Europe Software Software for Road Freight Operators 17m 15.0m IVC Group Jun 19 Europe Medical Services Veterinary Care 23m 20.3m Acuon Capital Sep 19 Asia Financial Services Savings bank and alternative lender USD $25.2m 20.5m *All figures as at 30th September 2019 Fund Size: 107m Committed: 77.5m (72.5%) Committed & Reserved: 82.5m (77.1%) Available for New Investments: 24.5m (22.9%) Source: LGPS Central Limited 23
Classified as Confidential Investment Performance Conclusions 3/6 ACS sub-funds outperforming the Target 4/4 of Passive and Factor based funds are within tracking error risk expectations 2/2 Active Multi-manager funds have the appropriate investment allocations to ensure that they do not hug the benchmark The LGPSC Private equity funds performance numbers are not meaningful, given most investments are still valued at cost. Mark Davies has been appointed lead manager of the Active Equity Multi-Manager funds and regular reviews of the external managers continue. His team is reviewing the factors and KPIs that we use to select and weight the existing managers. LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 24 24
Classified as Confidential Joint Committee Meeting Key Performance Indicators Mike Weston Chief Executive LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 25
Classified as Confidential Key Performance Indicators Client Focus Strategic Business Plan Goals Critical Business Relationships Partner Fund Relations Investment Management Client Satisfaction Cost Savings Responsible Investment Operational Effectiveness People LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 26 26
Classified as Confidential Key Performance Indicators Highlights (Dec 31 2019) Investment performance Quarterly LP reporting Target number of fund launches Client satisfaction levels Collective engagement No formal complaints received Cost savings in excess of Regulatory Plan Hosting of specialist events What we do well Areas of continuing focus LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 27 27
Classified as Confidential Key Performance Indicators Areas of Continuing Focus Active Funds are underperforming, but they have been in existence for less than a year. External Fund managers are closely monitored and are keeping to their remit for which they were appointed. We have no immediate concerns. Investment Performance Formal reporting timescales are yet to be agreed with Partner Funds. Robust internal reconciliations against data provided by external managers means that we should have processes in place to improve timely delivery of reports in the future Quarterly LP Reporting (Private Equity) Current product development pipeline includes Multi Asset Credit, Emerging Market Debt and Property. Climate Factor fund was prioritised over Multi-Factor Fund. Some Partner Funds have opted for Advisory Infrastructure mandates whilst we develop an Infrastructure Fund. Number of Funds Targeted to be Launched LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 28 28
Classified as Confidential Joint Committee Meeting Client Satisfaction Survey Callum Campbell Head of Client Services & Stakeholder Relations LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 29
Classified as Confidential Client Satisfaction Survey Process On-line, anonymous survey Distributed on 12th December 25 Questions ranging across a number of business themes 5 categories of ranking ( very unsatisfied, unsatisfied, neutral, satisfied, very satisfied) Survey sent to 14 participants (Partner Fund Officers) LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 30 30
Classified as Confidential Client Satisfaction Survey Response Highlights (Dec 2019) Transition Process Responsible Investment Publications Opportunities to Engage Event Hosting Target Product Delivery Transparency What we do well Areas of continuing focus LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 31 31
Classified as Confidential Client Satisfaction Survey Moving Forward Review of Survey to form basis of strategy to address highlighted areas which require further development LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 32 32
Classified as Confidential Conclusions As the Company has grown and developed, we are able to report back more meaningful information and performance data to the Joint Committee than previously As the Steward of your investments, our priority remains to improve investment returns for the benefit of local government pensioners, employees and employers Areas of our business where there is scope for improvement have been identified, and will be addressed We continue to collaborate with Partner Funds to develop and launch investment products to meet your needs LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB 33 33
Classified as Confidential DISCLAIMER This document has been produced by LGPS Central Limited and is intended solely for information purposes. Any opinions, forecasts or estimates herein constitute a judgement, as at the date of this report, that is subject to change without notice. It does not constitute an offer or an invitation by or on behalf of LGPS Central Limited to any person to buy or sell any security. Any reference to past performance is not a guide to the future. The information and analysis contained in this publication have been compiled or arrived at from sources believed to be reliable, but LGPS Central Limited does not make any representation as to their accuracy or completeness and does not accept any liability from loss arising from the use thereof. The opinions and conclusions expressed in this document are solely those of the author. This document may not be produced, either in whole or part, without the written permission of LGPS Central Limited. All information is prepared as of 05.02.2020. This document is intended for PROFESSIONAL CLIENTS only. LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB
