Quentin Marshall, chairman of Kensington and Chelsea’s £1.9bn pension scheme, has placed half of his assets in global stock index trackers, making it the best of any UK local authority fund over the past decade. achieved performance.
Marshall, who has chaired the fund since 2014, said individual stock and fund selections can hinder rather than help improve returns, and he prefers to make tactical decisions when the team meets to consider investments. He said he is avoiding it.
“Three things definitely don’t add value: post-risk and post-cost,” he told the Financial Times in an interview in his Mayfair office.
“The entire wealth management industry is built on the premise that there is value,” Marshall says. He is particularly appalled by consultants who advise pension funds on investment decisions and who “rely on forward-looking data that has clearly been shown to be completely and completely useless as a source of predictions.” is.
For the past decade, the 51-year-old Tory MP and banker has paid an average of 10.8 per cent a year for pensions for staff at Kensington and Chelsea City Council, which serves both the most affluent and wealthy areas of Britain. It has been profitable. Significant deprivation.
Shareholder advisory group PIRC says its performance has outperformed other local authorities due to its large equity exposure. Marshall’s fund was the only municipality to achieve double-digit annual returns over the past decade. Bromley City Council came in second best, following him with 9.3 per cent.
But Mr. Marshall is different from many of the people who run a patchwork of pension funds for government workers across the country. The Brompton ward councilor is also chief executive of Weatherbys Private Bank in Mayfair and previously held senior investment roles at Coutts and UBS Wealth Management.
Marshall believes part of his performance was due to a lack of decisions. His team formally meets once a year to review its strategic asset allocation, which has remained “virtually unchanged over the years.”
Half of the fund follows the BlackRock MSCI World Index Tracker, but he significantly changed its exposure to world stock indexes to exclude three companies linked to the devastating Grenfell fire in Kensington and Chelsea in 2017. did.
He declined to pick funds and stocks, and although he supports the government’s attempts to professionalize the investment process, he is not convinced by the UK government’s plan to pool all assets of England and Wales’ £391bn local government pension scheme. There is skepticism about whether the decision will help improve pension yields.
Labor Prime Minister Rachel Reeves last month laid out plans for a series of “mega funds” to manage local authority pension assets, which the government says will spur billions of pounds of investment in Britain’s infrastructure and fast-growing companies. I’m looking forward to it. The reform program was supported by his Conservative predecessor Jeremy Hunt.
But Mr Marshall disagrees with their argument that the reforms will improve pension revenues for cash-strapped councils.
“This has a nasty ring to it,” Marshall said, referring to public-private partnerships that were popular in the late 1990s and early 2000s and were widely thought to not add much value to people’s wallets. Ta.
“All governments in all capacities are under great temptation to keep public spending out of sight of the public. . . . But if it’s really an investment, there’s no telling us to do it. There won’t be a need,” he said.
“Is this money meant to forgive pension obligations or is it money for the government to spend? … I think they have a strong temptation to change from the former to the latter,” Marshall said. he added.
The Kensington and Chelsea Pension Fund has no allocation to infrastructure. Mr Marshall said he had been looking at infrastructure “carefully” but found that “management fees are very high, there is little diversification compared to liquid securities markets, and there is no upside in terms of returns compared to existing asset classes.” He said he chose not to invest because the scope was limited.
Mr Marshall said it was “absolutely fundamental” that strategic asset allocation decisions remained with local authorities as the government pushed to consolidate local authority pension assets. This is because local governments are still responsible for ensuring pension payments. Different boards have different risk tolerances depending on the pension scheme’s funding levels, contribution rates and the demographics of the scheme’s members.
The government has indicated it intends to leave “high-level strategic asset allocation” decisions to local councils, but the consultation said it believed Poole’s expertise was best suited to take on the task. .
“If you separate strategic asset allocation from the underlying debt structure, you’re going to have a big problem. Chain of responsibility is very important,” Marshall said.
Kensington & Chelsea is building a real estate portfolio, with an asset allocation target of 75% stocks, 20% real estate and 5% index-linked bonds.
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The council’s scheme funding levels are over 200%, meaning it estimates it will be able to pay out double the outstanding pension.
As a result, pension contribution rates have been reduced, allowing councils to spend more money on local services.
Although Mr Marshall has some sympathy for the government’s move to take investment decisions out of the hands of MPs who rely on the advice of pension consultants, he said the government has made sure there is enough in the system so that “reasonable people” can object. I hope that you will remain flexible.
“If it’s too strict or too principled, it’s likely to lead to bad outcomes, and I think the public should be careful about this because we have 400 billion pounds of assets.” . “This is real money and will have a huge impact on whether our local library stays open and my grandmother gets the care she deserves,” he said.
