Richard Law-Deeks: “I have noticed how important ESG and sustainability is within LGPS Central – it is the arteries and the veins of the organisation.”

20 Aug 2024

The new chief executive of LGPS Central tells Andrew Holt about getting to know what makes people tick, blowing his own trumpet, working with the new government and the benefits of playing war games.

Interviews

The new chief executive of LGPS Central tells Andrew Holt about getting to know what makes people tick, blowing his own trumpet, working with the new government and the benefits of playing war games.

You took up the role in June. How have the first two months been?

Very, very busy, but also enjoyable, exciting and fresh. I have focused my time on meeting our eight partner funds. I have already met six of them and will have met the other two by the time this is published. That is the focus for me. Getting to know them, getting to know any issues they have and getting to know where our strengths are.

It is the same with the team, which is about 80 people. I’m joining team meetings. I’m sitting out on the floor, not in an office, so I can get to know people and get to know what makes the organisation tick.

What have been your biggest challenges since you joined LGPS Central?

I have full days and so it has been finding the time to see everyone. I gave myself until the end of July to get to know people. Then it was formulating a plan ahead of acting on it from around September.

Meeting people has been beneficial. I’m excited about the future of the pool. We have some great talent internally, but also externally in the experience we have brought in from asset managers and banks. I’m excited about that.

At Royal Mail we didn’t have graduate trainees, but we do at LGPS Central, so we have people who have always worked here. That makes it a young organisation and it is exciting to grow your own talent.

Why did you quit as chief executive of the Royal Mail Pension Plan to join LGPS Central?

I spent nine years at Royal Mail, so the timing felt right. The big draw about LGPS Central is that it is a new organisation. There is an opportunity to shape and mould the culture. It is exciting to be somewhere where there is a growth story, something new, exciting and fresh.

Royal Mail is a 500-year-old organisation. It is all about de-risking: de-risking the governance, de-risking the assets and getting the member data ready.

It is a different proposition at LGPS Central. It has had the growth trajectory over the last six years and is now in a consolidation phase. But it is still very much about what is the future strategy, which is compelling and exciting to be involved with.

What have you set as your main priorities?

First is listening. Listening to the partner funds, to the team and the board to understanding where everyone is coming from. Understanding what I call “the triangulation” of the strengths of the organisation.

The organisation is six years in, so it is already delivering pooling. We have £30bn of assets here. It is time to take stock and work with partner funds to decide what the priorities are.

I cannot reiterate enough how solid I believe the foundations are. Having a new chief executive coming in is an opportunity to take stock to be clear on the future direction. So there are a lot of opportunities.

Do you therefore have a particular vision?

It needs to be driven by the partner funds. If you look at the history of the local government pension scheme (LGPS), it has taken a long time to get to where we are.

For pooling to move forward, it is going to be something partner funds need to work together on, and it is very much about the pools working with our partner funds. We want our partner funds to invest with us, we want to be their first port of call, not something they have to do.

Chief investment officer Gordon Ross leaves LGPS Central later this year. Is that part of wider changes within the investment team?

That is not part of a wider set of changes. Gordon has been here for six years and felt it was time to move on.
He has done a great job. He has coached the team and so there is a lot of love for Gordon here.
We have not rushed into announcing a replacement. We are still in that process.

LGPS Central has also appointed Nadeem Hussain as head of private markets and Mark Davies as head of public markets. Are these markets becoming more important for the pool?

They are definitely important. It is interesting where we are in the cycle. Private markets are probably finding it a lot tougher than they did pre-2022, but it is an opportunity [ for personnel] to step up. We are proud of that internal development process.

Do these appointments therefore suggest a different investment approach or other changes to the investment offering?

No. We have 27 funds, of which more are in the public markets because that is the nature of the asset class. It doesn’t signify any [investment] change. It just signifies change in our internal approach to developing people from within the organisation.

How important is ESG and sustainability to LGPS Central?

I realised it is heavily important in the recruitment process. And for me, it was another big pull factor of the role. It is something I had to drive forward at Royal Mail quite significantly.

I have noticed how important ESG and sustainability is within LGPS Central – it is the arteries and the veins of the organisation. It is core to everything we do here. I have never seen a board dedicate so much time to it. It is important and is important for our partner funds, as it is a huge risk. We take our responsibility seriously for our partner funds.

Also our partner funds like our climate risk reporting service. And everything we do in responsible investment and engagement goes down well.

In recent years there has been a lot for our partner funds to deal with in addressing sustainability and climate change. And this has had members asking questions about the investment strategy, or lobby groups or Task Force on Climate-Related Financial Disclosures reporting. It is something we have been able to add some value.

Trevor Castledine has been appointed as LGPS Central’s first chief commercial officer to lead engagement with your partner funds. Why is this role necessary?

For us it was an evolution. It was a role called chief stakeholder officer and some of the pools may still call it that. It wasn’t a new role; it was an evolution of a role. The way we see it is that it is not about business development, it is about working with our partner funds: so it is about collaboration.

It has been a case of joining the dots to drive forward our product development. We are, as I say, at that phase now to take stock, review everything we are doing and then drive that forward.

We were looking for someone with extensive experience in the LGPS along with consultancy experience, so they bring that in and help apply that with our partner funds.

Trevor is going to present us well in the market. We need a little bit of that. Some of the other pools have been better at talking about their successes than we have.

So you need to blow your own trumpet more?

It is judgement call. You have to get it right. If you overdo it, it doesn’t look great. Equally, if you don’t talk about anything, you get people asking questions. Each organisation is different, but it is something you need to engage with.

How is pooling going?

We are delivering pooling and have made good progress in six years. We have £30bn in assets under stewardship.

The consultation last year tried to compare the progress of each pool, but each has a different model and it was a bit ‘apples and pears’. What is evident, is that we have built out great foundations with a broad range of fund solutions, services that are valued by our partner funds such as RI&E, talented people coming up through the organisation.

These foundations position us to remain flexible and quick to respond to what may lie ahead. We want to position ourselves as being first choice for our partner funds. For me pooling is about active collaboration and developing pooled solutions our partner funds want to invest in, as opposed to being forced to invest in.

How would you like to see pooling progress and develop?

There are benefits of pooling. It is tried and tested. It is about the value add we can bring to our partner funds. As I said, we are keen for it to be driven by our partner funds. Not something that is forced upon them by central government.

It will naturally happen as we continue to work together. You need to give it time. It took time for each partner fund to get where they are today and we need to give them time to come together and coalesce around the pools that they have created.

Chancellor Rachel Reeves has some interesting ideas about pooling, such as a potential consolidation. What do you think?

She was talking about internal management, or in-house management capability, and that is a place where pools can add value. But consolidation, is it the right time to be talking about that? What is the perfect size? I have seen different evidence. I would quite like to see debate and discussion around it. I would like to see it driven by the LGPS not by the government.

Has the pool discussed that with government?

No, but there is the National Wealth Fund initiative and we did participate in that. We were engaged with the taskforce set up with Mark Carney. Part of my job will be to go out and speak with the new government and engage with them to find out what they are thinking.

From what I can tell, the National Wealth Fund will be based on an investment-by-investment approach, by what they call “crowding investors”. So it will be interesting to see how that is structured and made investible. Much of it is about wait and see, but much of it is also about getting our views across and we have been doing that. It is exciting. I don’t think Mansion House is going to disappear.

What do you think of the Mansion House pension reforms from the previous government?

For me, at the time, I had a defined benefit hat on [at Royal Mail] and it was very much about securing those benefits [ for the fund]. Whereas, if I had been in this role, I would have seen it a bit different.

Again, it comes back to the partner funds. For them, there is a range of views. For us, it is about what the partner funds want to do and then us facilitating that. I’m not surprised that it is an area of focus for the government, but the opportunities need to be right for the investment strategy.

So you don’t mind the government nudging you towards infrastructure, private equity and venture capital as long as it works for you in investment terms?

Yeah. As long as it aligns with the fiduciary responsibilities of our partner funds. We can create a fund, but if none of our partner funds want to invest in it, it isn’t going to go anywhere. It needs to be something they have an appetite for. The partner funds own the asset allocation and it is for us to help them with that.

What would you like to see from the new government?

Some consultation would be good. A chance to engage, not just with us, but the whole LGPS. And give pooling a bit more time. They also need to take a long-term view, which would be welcome.

What has been the biggest lesson you have learned in your career?

I’m obsessed with contingency planning. I love war gaming, thinking about different pathways, so throughout my career it is a case of hope for the best, plan for the worst.

We did a lot of contingency planning at Royal Mail. We had cyber incidents, the LDI crisis, a takeover, all stuff that would be covered in war games and then we would develop around that. That is one of the things I’m proud of and glad we did as these things did happen. It is great to be prepared.