Being joined-up is an interesting phrase. Its use grew up in government where it was a beacon to draw on best practices and behaviours in coordination between wings of government, collaboration between key members of government and coherence of thinking in the policy setting process.

All fine aspirations. All devilishly difficult. In the main, joined-up government is an oxymoron.

In this article, we apply those three C’s to the investment industry and specifically the asset owners. We suggest the joined-up term involves getting the fullest benefits from coordination, combinations and coherence across people, teams, organisations and ideas. The investment enterprise at its core has a mission to add value to capital by combining the efforts of separate groups of people in the pursuit of return. Monk and Rook in their investor identity paper put it this way: ‘All investors produce returns in the same general way: they take capital, people, processes and information as inputs and combine them to generate investment returns, which increases financial capital’.

The complexity of the investment industry is clear from just how many groups of people make up the ecosystem of an asset owner – board, executive team, support teams, asset managers, other providers, investee entities, regulators, end investors – these make up most of it, but there are more, the ripples carry on.

So, are there some general conclusions about how to optimise these combinations and bring greater value creation to the asset owner? Essentially, can the asset owner become better joined-up?

It turns out that there are several ways to produce larger combinatorial benefits, but they all involve the deployment of the soft and subtle organisational alpha that is generated from a mosaic of governance, culture, talent, and technology.

The key piece of this mosaic is the alignment of the organisation to one set of specific goals. In this area the approach that secures alignment is one where improvements to the total portfolio is the arbiter of success. This is not the traditional way things are done – the strategic asset allocation (SAA) approach with its policy benchmark introduces biases and the drag from tracking errors. Instead, you need a common framework best described as the total portfolio approach (TPA) that has all investments and groups compete for capital with their best ideas for the total portfolio.

Securing the best organisational alpha for asset owners will depend heavily on four combinations:

  • the board and executive management combination
  • the combination within the asset owner of specialist teams (asset classes, strategy, risk, etc) and support functions working in full alignment
  • the asset owner and asset manager combinations
  • the asset owner and asset manager combination with investee entities employing stewardship and engagement activities.

Each of these areas is difficult. Combinations require significant levels of trust, co-operation, and shared understanding of goals. The organisational incentives may pull in another direction away from the goals. Organisations tend towards one dominant in-group and multiple out-groups and silo behaviours are widespread as a result.

This is accentuated when the out-groups have intrinsic alignment differences as commonly occurs. We also see cognitive errors in how asset owners see collaboration with its merits under-recognised. Some of the blind spots comes from the difficulties in measuring and attributing the outcomes of collaborative actions.

Joined-up in sustainability

But when something is hard it is often very rewarding to do it well. This turns out to be the case with being joined-up, and particularly in how sustainability can be joined-up.

First, there is the rightsizing of sustainability ambition with commitments to the primary goal of maximising returns per unit of risk. Being joined-up here involves the shared vision of the materiality of sustainability factors to financial outcomes.

Secondly, there is the step-up in ambition that some asset owners choose in employing universal ownership strategies where having impact on the wider ecosystem is instrumental to better long-term financial outcomes. We refer to this as 3D investing in which risk, return and real-world impact are joined-up in a competition for capital that integrates sustainability impacts across the SDGs.

The challenge with this is that we have “super wicked” problems needing holistic thinking and cross-agency coordination to tackle the complexity and apparent intractability of the many pressing societal issues captured in the SDGs and most significantly in dealing with climate change.

Joined-up in climate

Notwithstanding this challenge, being joined-up works well with climate.

The first leg is the net zero investing strategy that reduces real-world emissions. Allocation of primary capital to climate solutions plays a part. Stewardship and engagement with higher emissions companies also plays a part in helping accelerate the energy system shift. Systemic stewardship and engagement – across high-emitting industries and on public policy – plays a particular part in guiding collective action.

The second leg is linking the climate impacts with the financial outcomes over time. The returns asset owners need can only come from a system that works and the theory of change thesis is that this allocation and engagement strategy will mitigate the considerable risks to the financial system from a changing climate system. The beauty of this is that this sustainability impact strategy has fiduciary integrity by being instrumental to better financial outcomes.

Climate change is the mother of all super-wicked problems. Finding any decent contributions to a solution is a cause for celebration.

We have an understandable desire in our ecosystem to see simple causes and effects, but the interconnectedness of all things makes that unrealistic. Hence this need to be hyper joined-up in thinking and action. OK, I’ve made things more complicated in seeing our world through an ecosystem lens. But if we can simplify this and progress this to the point where our whole industry frames things using this mindset our anxiety-laden future should not be so chequered after all.

 

PGGM, the €228 billion asset manager for the Netherland’s second-largest pension fund PFZW, is working with US hedge fund manager Bridgewater to help restructure its portfolio to incorporate impact.

The research partnership will integrate a 3D approach incorporating risk, return and impact at PGGM that goes beyond its existing SDG alignment and particular focus on healthcare and climate themes. Still in the early throes of the partnership, the investors are collaborating on analytical detail and wrestling with the tough issues that go into building these new portfolios.

Arjen Pasma, chief fiduciary manager, PGGM, and Carsten Stendevad, CIO, sustainability at Bridgewater, took to the stage at Sustainability in Practice, the University of Oxford, to detail the strategy in action that will ultimately change the look of PGGM’s portfolio, most notably reducing the number of public market stocks.

“We will look very different in five years’ time,” said Pasma, who said the approach applies across public and private markets and the bar for claiming impact is high “There will be fewer names in the portfolio. Research involves a lot more than just buying a company.”

The importance of beliefs

In a catalyst to the new strategy, PGGM recently re-wrote its investment beliefs in a process that has shifted its focus away from exclusions, targets and risk and return optimization. Instead it has begun honing-in on the assets in the portfolio and conducted deep dive analysis on how to make the portfolio more sustainable.

The new approach is already addressing previous challenges – like the fact exclusions “don’t work” in the 30 per cent allocation to private markets. “For every single line in the portfolio, we want to know why it’s there and that we’ve evaluated the risk,” said Pasma.

Carving out beliefs sharpens strategy and helps navigate uncertainties. For example, investors need a strategy on whether or not to finance transition assets. Are they  prepared to invest in high emitting companies if they are reducing their emissions and are on a credible pathway? This type of analysis involves a long journey and comparing notes in a concrete and practical process. Elsewhere, beliefs help decide whether to focus on climate or social issues – or both.

“There is no right way of doing it, but you need to understand all downstream choices,” said Stendevad.

Beliefs also provide a framework to respond to difficult questions around performance. Investing for risk, return and impact requires a more rigorous investment process and frequent trade-offs in contrast to less complex ESG strategies shaped around exclusions.  It also involves having to defend strategies – like a decision to continue to invest in fossil fuels. “How do you measure that trade off? It’s a scary journey that might lose folks,” he continued.

Bridgewater conducts some its research in a top-down approach. This  seeks to analyse the impact of climate policy on markets and economies, for example the IRA and European climate regulation. Elsewhere, the team are looking at how China will balance growth and climate policies.  “Net zero won’t happen by itself. It will happen because policy makers make choices and our job is to try and understand how climate policies help the world and will change how economies work,” said Stendevad.

In a next step, Bridgewater is building out a detailed understanding of sustainability at an industry and company level, exploring how integrating sustainability interacts with impact, risk and return. “We want to take all this understanding and incorporate it into our fundamental investment processes. Any portfolio manager should be able to say this is my return, here is how it fits my risk dynamics, and this is how this company is aligned with sustainability. That is the north star but in practice it is difficult.”

The research partnership also seeks to understand which companies will impact the world most and aims to get under the hood of bank lending to fossil fuels – and to what extent banks are financing the transition.

“It’s not easy to to assess banks’ balance sheets and understand if they are aligned to net zero but only by breaking apart bank balance sheets, will we see if banks are putting money to sustainable outcomes,” said Stendevad.

In another strand, the research also seeks to assess to what extent sustainability endeavour is supported at CIO level. Strategy often flounders without leadership, and sustainability has to come from the top of the house.

Global investors have committed to net zero, but implementation around those commitments is slow with little action on the ground.

“We are seeing lots of commitments but not much implementation,” said Carola van Lamoen, head of sustainable investing at asset manager Robeco, opening Sustainability in Practice at the University of Oxford where attendees have collective assets under management of $8.5 trillion and include some 64 global asset owners.

“Around 50 per cent of our total assets under management are under net zero commitments. But that doesn’t mean these investors have introduced targets on a mandate level.”

Implementations and action on the ground include engagement and voting; working with partners and clients to identify companies with the biggest carbon emissions, and accelerating real world transition. Van Lameon added that joining forces with other asset owners through organizations like Climate Action 100+ as well as sovereign engagement is another way to act on net zero promises.

Sustainable strategy at £60 billion Border to Coast, the LGPS pool managing assets on behalf of 11 partner funds, has come under particular scrutiny because it manages money for public sector employees. Positively, being in the public eye has helped accelerate integration of sustainability – visible in new targets and the investor’s focus on investing in “well managed companies for better long-term outcomes.”

However, it has also bought the fund in contact with politics, including picket lines outside the investment office and press coverage of its investment process. “The emotion that comes with this is challenging and we have to remind ourselves why we do it,” said Rachel Elwell, chief executive of Border to Coast, reiterating: “We believe climate change will have a material financial impact on the portfolio so we must understand the risks.”

She added that integrating sustainability is challenging because it’s difficult for investors to gage what is within their control. “There is a risk that asset owners have oversold what they can deliver,” she warned. She said all progress depends on being in conjunction with policy makers. “We are seeing some splitting of strong coalitions in financial services because the government hasn’t kept up with leadership. There is a need for investors to engage with governments to help them understand their role.”

In a step change in its sustainability strategy, PSP Investments, which invests C$230.5 billion on behalf of Canadian public sector pension plans, has introduced a climate strategy set around short-term targets. This includes goals around investing in green and transition investments, and reducing carbon in the portfolio. The strategy involves mapping investments, data gathering, looking at the carbon intensity of investments and companies’ transition readiness. “Do portfolio companies have a plan and is it science-based?” asked Herman Bril, PSP’s managing director and head of sustainability.

Green asset mapping

Brill advised attendees to map their green assets to understand “where they are today, and where they will be in the future.” Moving forward, this should take into account regulation, changes in accounting methodologies, and the fact data will improve. “Every five years refresh and update strategy,” he advised. “Realise what you have learnt and how to move forward; move forward step-by-step.”

These moving pieces make hard targets difficult. Governments, companies, consumers and the accounting world need to align to long-term net zero targets, he said. “In reality we need all the levers to change,” he said.

Moveover, it is difficult for universal owners to effect change if the world is not decarbonizing. A short-term focus helps ensure delivering on actions rather than simply making false promises. In another approach, PSP Investments also changed its narrative around ESG, swapping talk of responsible investment to framing all discussions in the context of sustainability and climate innovation. This allowed the institution to move away from ESG and compliance. “The investment opportunity is massive. We are not an impact investor, but an investor with impact.”

Brill noted that it is easier to integrate sustainability in private investments because of the ability to steer corporate strategy via a board seat and direct engagement. PSP splits its portfolio 50:50 between public and private assets.

PSP prides itself on being strong and smart, staying on course and working with its board rather than try to influence the vicissitudes of short-term politics – something he said was unmanageable. “We invest 50-years forward,” he said.

Chris Mansi, global delegated CIO of Willis Towers Watson, a delegated asset manager for institutional funds, said that integrating sustainability is a multi-year process and progress will have challenges to be addressed on the way. WTW regularly reviews sustainability targets for client funds, breaking these goals down into short-term actions. He flagged that integrating sustainability requires a “financial underpinning” alongside assessment of impact and said that in most circumstances WTW did not support divestment as a means of achieving sustainability goals. “[Sustainable investment] requires ongoing review of where we are and how we make decisions.”

Indeed, many pension fund have set targets that they hope to achieve, but the reality is they may not. Panellists agreed that fiduciary duty in the context of net zero “needs consideration” particularly since the world “is off track,” the politicization of ESG is also slowing progress and integrating sustainability appears to be in decline. Some managers (particularly those based in the US) are reneging on commitments and trustees that used to commit to energy transition are now more reluctant because the political and social landscape has changed.

The conversation also focused on how divestment is no longer the right strategy – and that it is not possible to divest your way to net zero emissions. In fact, asset owners are finding themselves increasingly central to the debate on how to finance emission reductions.

Van Lamoen concluded that investors are allocating to transition assets, rewriting their strategic ambitions, beefing up stewardship and engagement. Despite the challenges, she stressed the important progress that has been made towards decarbonization, the introduction of more forward analytics and the role of engagement whilst signs of government inaction include the Inflation Reduction Act in the US and  Europe regulation that is also driving change.

The key question for pension investors today is whether risk premiums are the same as they were a few years ago when interest rates were much lower – or in the past when economic growth was much faster.

So says Timo Löyttyniemi, CEO at VER, the €21.6 State Pension Fund of Finland, established in 1990. In a recent research note, he writes how many investors expect returns to fall slightly in the coming years, but warns the economic backdrop can quickly change.

Interest rates were so low a couple of years ago that low return expectations had a real basis. Now that interest rates have risen by 2-3 percentage points, the key question is whether this rise in rates will be directly reflected in improved overall returns or whether risk premiums will be lower than before.

“The assumptions concerning these developments will be key questions to be pondered by many pension investors this autumn,” he writes.

“Risk premiums may vary depending on interest rates, the overall market sentiment and market prices. Even if the calculations were completely revised in response to these developments, the new assumptions could also prove wrong.”

Underlying return assumption are based on the yields of each asset class above the risk-free rate, he continues.

“The risk-free rate is the short-term interest rate, which in the euro area is currently around 4 percentage points.”

When investors make their return calculations they must determine how much equity investments, corporate bonds, high yield loans, private equity, real estate investments and other similar asset classes will yield above this said bond rate, he explains.

“When these are then weighted by asset class, we obtain the expected return for the entire portfolio. For pension investors today, it could be from 4 per cent to 6 per cent, or 2 per cent to 4 per cent in real terms over the long term (more than 10 years), depending on the pension fund, the composition of the portfolio and the assumptions used.”

Return expectations

The long-term return assumption (expectation or target) is probably the most important assumption made by a pension investor. It is determined, explains Löyttyniemi, by investors making a wide range of assumptions concerning returns, volatilities and correlations in respect of the various asset classes.

“While the return assumption seldom hits the bull’s-eye in the short term, it often proves more or less accurate over periods exceeding ten years. This means that while it is advisable to disregard it in the short term, it may well be used as a basis for the pension system in the long term. Reliability is not perfect but could be sufficient if other adjustment measures are available.”

As for pension liability calculations, he says they are complex and involve a huge number of assumptions relating to age, retirement and mortality rates. Perhaps one of the most important assumptions concerns the discount rate. “It may be a fixed rate or can be derived from market rates, in which case it varies in response to market rate fluctuations,” he says.

“In this respect, individual countries have made different choices. In Finland, the rate is fixed whereas in the Netherlands the discount rate is currently based on market rates.”

One challenge arises if interest rate assumptions prove wrong.

“If interest rates are sufficiently low, the risks of incorrect assumptions are probably lower as pension liabilities are higher in terms of current value and no false notions have arisen. Choosing a highly volatile market interest rate, on the other hand, forces you to invest at least partly in line with the corresponding interest rate behaviour.”

investment beliefs

Löyttyniemi explains that long-term investors base their decision on key assumptions and investment beliefs are a key part of the decision-making process. “Investment beliefs are important because they usually serve as a guideline for long-term policies and investment allocations,” he says.

Investment beliefs are used to draw up assumptions. Which in turn serve as a basis for various calculations, usually to optimise portfolio structures and the relative weightings of asset classes. “For example, one assumption could be the belief that a more sustainable company produces better returns or risks are lower,” he says.

“It can also be assumed that the carbon neutrality goals and schedules of governments and companies will be fulfilled. If these assumptions are not fulfilled, the investor can easily make wrong decisions and in that case investment returns may suffer. Of course, if there has been more talk than action in terms of responsibility, no damage has been caused by following the indices.”

Pension investors do not modify their portfolios overnight, concludes Löyttyniemi.

When changes to portfolio structures are made incrementally, the assumptions made or beliefs used in any given year do not result in undue risks or deviations. However, small changes accumulate to transform into big ones.

Many assumptions are confirmed over the long term rather than in the short term. But any correction to assumptions is also costly.

 

Sceptics cautious about the hype surrounding artificial intelligence underestimate the major scientific and civilisational advancements the technology will bring, says former Google Cloud chief scientist Fei Fei Li. She says investors should look beyond household tech names, and explains why Chat GPT-style large language models are just the beginning.

Asked whether artificial intelligence is just another fad, destined for bouts of market mania and malaise like cryptocurrency, Fei Fei Li takes issue with the premise.

“As a Stanford Professor, we are not in the business of hype – we are scholars and technologists,” she told the Fiduciary Investors Symposium, hosted by Top1000Funds.com on the grounds of the famed Californian university campus in September.

“I’ve seen hype cycles and misinformation, but I do genuinely believe this technology has arrived. This is a genuine inflection point in technology.”

Li, a professor of computer science and former Google executive described by Bloomberg as the “godmother of AI”, says the technology being developed in labs like the one she oversees at Stanford will not just trigger a productivity revolution that is advantageous to commerce, as predicted by bullish investors and analysts. Properly applied, it will “boost our civilisation in an accelerative way”, Li said.

While AI-enabled language models have captured global attention since the launch of the ChatGPT tool last year, the next frontier of innovation is the development of models that “understand the physical world” and can interact with it via robotics or other hardware applications, Li said. She gave the example of AI tools cooking an omelette, building flat pack furniture or changing an infant’s diaper.

But these physical world applications would also have vastly beneficial impacts for humanity, Li said, identifying the healthcare sector as being perhaps the example of use cases she is most excited by. AI-enabled medical technology and patient care could greatly alleviate the cost and labour burdens on hospital systems, she said.

Even the current iteration of large language models are assisting rapid advancements in health, she said, with some researchers using AI to comb through centuries’ worth of medical literature in search of new treatments and drugs in light of more contemporary knowledge.

“I am particularly gung ho about healthcare, it’s not easy, but there are so many human lives to be benefited — aged care, companionship, wellbeing, there are a lot of opportunities.”

‘Let’s not be lazy’

For investors, Li said the opportunity was almost unfathomably large given her thesis that AI will become as omnipresent as the internet. “Anything with a piece of software in it right now – your phone, your car, your fridge – tomorrow that will have AI in it,” she said. “It is the new compute. It manifests itself as a computational technology.”

And, as such, many of the largest Fortune 500 and Nasdaq-listed tech companies have understandably made forays into the emerging market, most notably Microsoft’s backing of ChatGPT issuer OpenAI.

However, amid the surging market demand and analyst and press attention, Li warned institutions not to confine their allocations to the promising technology to large-cap public equities.

“I want to invite everyone to rejuvenate this technology,” Li said. “I worry the oxygen is being sucked by a single-digital number of big companies. There’s nothing wrong with them, they’re amazing. But it would be better for many flowers to bloom.”

Professor Stephen Kotkin of Stanford’s Hoover Institution added: “So let’s not be lazy and just go to the big companies that own the cloud.”

But she also warned that funds willing to provide capital to start-ups operating in the AI space should ensure the firms and founders they are backing truly understand the computer science behind their operations, and not just the business use cases.

Asked about the downsides of AI, Li admitted that unregulated application of AI could be “dangerous” and identified misinformation as a key concern.

However, she concluded this was true of almost all groundbreaking technologies throughout history – and that the potential social and economic upsides greatly outweighed the risks.

“I am not a pure utopian,” she said. “To promise [only good would come from AI]  would be a little irresponsible, because along the way this technology, plus the pitfalls of human nature, creates landmines.

“[But] from the time we build axes with stones we knew those tools could be used positively and negatively.”

Over the last eight years the United Kingdom’s 86 local authority pension schemes (LGPS) have pooled their assets into eight mega pools, most going under the umbrella of newly created FCA-regulated asset managers, re-tendering their portfolios, moving staff to shared offices and nurturing new cultures into life. Some have taken a different approach, amongst which sits the £18 billion West Yorkshire Pension Fund for local government beneficiaries in the north of England.

West Yorkshire has pooled its private equity and infrastructure allocations into Northern LGPS, the pool for neighbouring funds £29.3 billion Great Manchester and £10.8 billion Merseyside Pension Fund, which together make up three of the largest pension funds in the country. Like other pools, the process has generated efficiencies by sharing resources, and according to annual CEM performance and cost benchmarking, Northern LGPS’ costs are materially below the global peer group average.

But when it comes to the rest of West Yorkshire’s portfolio, apart from two pool mandates in excess of £10 billion each, the pension fund continues to invest the bulk of its assets via its own 20-person in-house team based from its Bradford office. Two hundred miles north of policy makers in London, cranking up pressure on the pace and scale of pooling as it seeks to get the LGPS to invest at scale in the UK economy.

The government has just closed a consultation on pooling’s progress and processes that will shine a spotlight on Northern LGPS and West Yorkshire’s approach acknowledges Leandros Kalisperas, West Yorkshire’s CIO, charged with defending West Yorkshire’s reluctance to pool.

“There must be an element of people thinking, why should Northern be able to withstand the pressures that other pools have had to feel. But within Northern LGPS, we have a set of low cost listed mandates as well as direct and allocation expertise across private markets that is proving successful.”

Kalisperas argues that West Yorkshire’s proud heritage of internal investment management aligns with the government’s objectives to foster in house investment management within the pools, and a levelling up agenda designed to end disparity in wealth and opportunity in the UK by creating financial services jobs outside London.

“The government hasn’t created pooling just to be a middleman for trillion-dollar commercial asset managers,” he says. “If internal investment management is an important part of efficiency and levelling up and creating centres of excellence outside London, we are absolutely playing our part.”

Nor does he believe the current structure will impede West Yorkshire’s ability to access alternative opportunities, a portfolio he seeks to build out. West Yorkshire invests in private markets via GLIL Infrastructure which manages infrastructure assets both for another LGPS pool as well as for Nest’s DC assets, and via a private equity collective vehicle, NPEP.

“In private equity and infrastructure, we have a solid and practical pooling structure,” he says. “The biggest challenge in the UK going forward is simply the supply of opportunities.” Stable operational assets with income are hard to find for investors like West Yorkshire with a total return perspective, able to cope with long-term returns, he says.

Resourcing a bigger team could be easier with more assets under management, but West Yorkshire has a stable team and culture that shouldn’t be thrown away lightly and should be leveraged for the wider good. Pool success depends most on alignment of strategies and the underlying approach to investment rather than of total AUM, and size alone doesn’t necessarily equate to lower costs.

“If I had to choose, I would prefer to have a stable investment culture and team, rather than just be able to throw big numbers about,” he says. In short, West Yorkshire’s strategy is no different to other sophisticated asset owners that have in house expertise and strategic external partnerships, he says.

West Yorkshire is also committed to the government’s ambition that pooling support broad UK economic growth. Kalisperas wants to both fill and build out the alternatives bucket that is currently underweight its target 5 per cent allocation. “It will likely involve some reallocating of UK listed equity to UK private equity, UK private debt and venture.” He wants the boosted allocation to focus on local impact in the region with infrastructure, affordable housing, and climate investment at the top of the list. He is also interested in tech innovation spinning out of UK universities.

Unlike the other two funds in the Northern pool which represent large cities, West Yorkshire hasn’t been able to invest as much to boost the local economy because it has been harder to generate opportunities in its more diverse set of local economies. “I suspect that developers and commercial asset managers find it easier to supply local opportunities for Merseyside’s and Great Manchester’s pension funds, but we simply have to work harder to make sure that people know we are open for business,” he reflects.

That hard work includes creating an impact structure and strategic framework that will allow West Yorkshire to consider the types of investment that will generate a return but are unlikely to hit the return target at a total portfolio level. “There must be a place for investments that have a return below our total return target, but which have an impact. If there wasn’t, bonds would almost never be in anyone’s portfolio. Someone can say I want us to do more in West Yorkshire and someone else say we aren’t grant money – both views are correct, but they are not mutually exclusive.”

Alongside governance and benchmarking systems it has involved changes to direct reporting in the investment team, and making sure that investment opportunities aren’t just seen by one team, something Kalisperas worked on in his time at USS between 2010 and 2016. “We are creating more spheres of influence within the investment team and making sure it is not just one person looking at inbound opportunities from our partners.”

Still, despite the many benefits of West Yorkshire’s investment approach he notes the fund hasn’t kept up with the expansion in the investment universe and the global market opportunity. His plans for reallocation will also focus on fixed income and credit where he says West Yorkshire remains quite narrow in its current view of investment opportunities. Emerging market debt, asset backed securities or CLOs are corners of the market the fund simply doesn’t touch. “We should try and find ways to ensure we are allocated to a broader global market opportunity set.”

Around 70 per cent of the new benchmark is in allocations that are sensitive to economic growth that include public and private equities. Twenty per cent is in fixed income and credit instruments, 5 per cent in property and 5 per cent in alternatives.

Kalisperas has only recently got his feet under the table but he already knows what he wants as his legacy. “Much as I am proud of having been appointed, I want my successor to be local and that is harder to happen if people are only looking at one part of the puzzle. I want someone from the current team to apply for the job when I leave and if they are the best candidate, to get it.”

In the meantime West Yorkshire waits for the results of the consultation to provide clarity and on whether its hybrid approach to pooling is enough to assuage government masters in London.