The serene atmosphere of day one of the PLSA conference did not last. The second day saw the Government coming for pension scheme money and the mood in the hall turn sour.
If you want to win these friends and influence people, get on an Avanti West Coast train to Manchester and hop on a tram. There were 800 delegates awaiting Andrew Griffiths to address them , what they got was another Zoom call from an MP who used half his speech telling the people he was addressing how much he respected him. An elderly Mr Grace, waving his walking stick and telling us “you’ve all done very well” would have done the job better.
Ministers who take the guardians of our big pension funds for granted, also take the beneficiaries of that money for granted. It is beholden on the architects of pension policy to turn up and answer awkward questions in person. I suspect there was not one person in the hall who felt andrew Griffiths’ performance satisfactory. To many it was shameful.
Investing other people’s money is a discretionary business, we put our trust in the executive teams of schemes like Nest and BT to invest with skill and conviction, not political conviction but the conviction that what they are doing is right.
Although I don’t agree with her, Elizabeth Fernando, CIO of Nest has the right not to invest in start-ups. She told the hall Nest, was reluctant to expand its UK investments into early-stage companies, which had the potential for higher returns but also carried higher risk.
“We want proven business models ,our job is not to support levelling up. It is to build retirement funds.”
You cannot change attitudes by delivering unprepared Zoom calls to the people you are selling to.
Morten Nilson, CEO of the BT pension scheme said as much
“We are forced to be global, The government has a real opportunity to help facilitate people like us who have slightly less risk appetite. We actually have quite a bit of money to deploy,”
Cleaning up other people’s mess
Investing in long term capital is likely to be unpopular not just with scheme bosses but with staff. Recently USS, Britain’s largest corporate defined benefit plan announced it was a long-term investor in Thames Water. It is now putting its money to use cleaning up the mess left by Australian McQuarie Bank who ignored all the principles of ESG and used its period of ownership to asset strip and dump the waste in our rivers.
USS are quite literally , cleaning up McQuarie’s mess and taking a thumping from members for keeping Thames Water afloat. Welsh Water admitted yesterday that it has been dumping raw sewage into the sea for years. You can see the outflow pipe on google
The bottom line is that many of these water companies are so badly managed that they don’t have the money to support the capital investment needed to treat sewage properly. (many of them don’t have the capital support to pay pensions properly either).
But investing in them is not without risk , especially when the pension teams and trustees are measured for the value they achieve from the money invested.
Once again, the question is not whether UK pension funds should invest in start ups , in UK infrastructure and other difficult assets but why? It is perfectly possible to do a good enough job investing in publicly quoted markets and not take bets in areas where valuations are nebulous and the amount of due diligence on the investment can be disproportionate to the value created.
At another session, John Roe – head of multi-asset at the mighty LGIM made just this point.
We are likely to see movement from the £2tr occupational pension scheme sector when the appetite to take on extra risk, extra work and the reputational issues of getting it wrong are counter-balanced by upside from extra returns, greater value in the work and a recognition that the job that has been done – has been well done. Pension Schemes are run by people and even if the sums they manage are significant to the management of the economy, basics apply.
I suspect that there is some economic rabbit yet to be pulled out of the hat on all this. If there is , then the Autumn Statement will be the place to extract it. If there isn’t, then the PLSA will be left wondering why it should be left to clean up other people’s mess, when their Government is taking them for granted