Annual General Meeting Chris Tambini, Director of Finance Colin Pratt, Investments Manager

 Governance arrangements  Administration  Investment performance  Asset pooling

 Local Pension Board effective from 1 st April 2015 – three meetings held so far  Three member representatives, three employer representatives  Pension Fund Management Board renamed ‘Local Pension Committee’  Investment Sub-Committee deals with more detailed investment issues

 New 2014 career average revalued earnings “CARE” scheme has significantly increased complexity  Benefit calculations take longer  New staff have been appointed  Performance of certain tasks are below targets  A common problem across the LGPS  But the issue is being addressed and things will get better  Customer satisfaction remains high

 Active membership is growing again, following dips in 2011/12 and 2012/13. Now at highest ever year-end total  Nearly 84,000 members (active, pensioner and deferred) at year end  Pensions in payment almost £100m p.a.  Over 1,500 new pensioners in 2014/15

 New CARE scheme caused problems, with many employers failing to provide accurate pay data in a timely manner  This lead to Annual Benefit Statements being produced later than the statutory deadline  Every step possible is being taken to ensure that this does not happen again  Most LGPS Funds also missed the deadline

 Fund’s sources of return are relatively well diversified, but equities remain the dominant asset class  Outperformance of benchmark by 4.2% in 2014/15 (15.6% vs. 11.4%), with two portfolios adding a large chunk of this outperformance  Aspect Capital produced performance of over 50% and were responsible for 1.8% of outperformance  Millennium, an active currency manager, created almost £24m of added value, or 0.8% at a total Fund level

 New ‘private debt’ portfolio commenced during the year, funded from the reduction of an existing bond portfolio  Emerging market equity portfolio terminated and monies deployed with other existing emerging market equity managers  Emerging market debt portfolio commenced (2.5% of assets)  Japanese equity exposure increased, following clear signs of improvement in company governance standards

 June and September quarters produced negative returns – FTSE All Share index down by 8.4%, other equity markets down by similar amounts or more.  December quarter did not seen a recovery  Leicestershire’s lower equity than most Funds means there has been a lower impact, but falling markets mean lower asset values. Fund down by 5.6% in six months to end of September.  Diversification from equities has provided protection, but performance has still been negative

 May 2013 – speech by Local Government Minister opened up the prospect of LGPS Fund mergers  June 2013 – ‘Call for Evidence’ consultation into future structure of LGPS  May 2014 – Government’s response to Call for Evidence ruled out forced Fund mergers, and a further consultation on the ‘Opportunities for collaboration, cost savings and efficiencies’ was launched

 July 2015 – Chancellor’s Summer Budget announced that ‘the Government will work with local government pension scheme administering authorities to significantly reduce investment costs by pooling investments, while maintaining overall investment performance’  This announcement was, in effect, a further consultation  November 2015 – Investment Reform Criteria and Guidance issued

 Leicestershire has been working with over 20 other LGPS Funds to gather evidence and agree a future structure that is considered to be optimal  Department of Communities and Local Government and Her Majesty’s Treasury have been willing to listen to the views of the LGPS Community  These Funds will shortly publish their combined view of the best way forward. This will meet all the criteria laid out by the Government and ensure cost savings and good governance

 Asset allocation decisions (i.e. where to invest the Fund’s assets) will remain with individual Funds  Selection of individual investment managers will be taken at an ‘asset pool’ level  There may be marginally less flexibility around investment choice, but this is necessary to achieve the economies of scale  Getting the structure and governance of the asset pools is crucial, but there should be no major transfer of control from individual Funds

 Nothing  Investment returns and costs of managing the Fund have absolutely no impact onto the benefits of individuals  Administration will continue to be carried out at individual Fund level  If asset pooling is successful in its aim (higher investment returns, net of costs) it will have an impact onto employer contributions in the long-term. But it will not bring immediate relief from higher employer contribution rates.

 19 th February 2016 – Commitment to pooling needed, together with details of progress towards formalising arrangements with others  15 th July 2016 – Refined and completed submissions by each Fund  Establishment of collective investment vehicles within 18 months  Liquid assets transferred to pools from 1 st April 2018

Any Questions?