LPFA: How proper governance can boost fund returns

These partnerships, covering asset and liability management, and infrastructure, are highly significant for our organisation and for the Local Government Pension Scheme more broadly, pointing the way to a new, collaborative method of working for the benefit of our members.

We have moved to a liability-based investment management approach, which has focused our attention on illiquid assets that provide us with an excellent match for our liability profile.

We have also brought more investment in-house and are concentrating on a ‘buy and hold’ investment strategy in equities, which reduces our transaction fees. 

We are in the process of developing the details of the partnerships and ensuring  correct governance is in place for their successful management.  

Local pension boards

As we are building our £10bn ALM partnership, the recruitment of an independent chair to cover both local pension boards is an important step.

We have appointed William Bourne as the joint chair of both LCPF’s and LPFA’s separate local boards. He has more than 30 years’ experience across pensions and finance, and has advised pension funds in the UK and Europe, including a major Scandinavian local government pension scheme.

I believe firmly that it is necessary to appoint professional specialists to direct scheme governance, and the knowledge and skills of our board at LPFA and pension committee members at LCPF is an important aspect of this.  

The LPFA board is selected and appointed for their experience of pension fund management, public service and corporate governance.   

Research shows that professional governance has a positive impact on fund performance.   

Our board helps us focus our strategy and ultimately reduce our deficit.

As a final thought, it is worth remembering  this is not just about local authorities; there are a number of employers within the LGPS – smaller employers such as charities, for example – that would benefit from improved governance and expertise in all aspects of fund administration.

While improving governance can brings extra costs, it can also create a dividend in fund performance and is an essential tool in tackling the LGPS deficit.

Susan Martin is chief executive officer at the London Pensions Fund Authority