I've been in Bournemouth for most the past three days, at the annual Local Authority Pension Fund Forum. As usual there was a lot of interesting stuff on the agenda, but the event seemed particularly lively this year no doubt because of the financial crisis. A few highlights -
George Magnus of UBS, who gave the first speech of the conference, was great. Notably, although he said that in the immediate future the economic news was going to be very bleak, he said he was optimistic about the recovery. This was because the politicians and central banks had 'got it' and their collective action was likely to stop the crisis taking an even more nasty turn. He was also broadly pretty positive about the PBR, arguing that although Darling's action plan had a lot of holes, it should work. The most striking thing he had to say, in my opinion, was about the likely longer term impact that the financial crisis would have. He said he expected rocket scientists to go back to making rockets - ie talented graduates are more likely to go into other careers than the City. Engineers will engineer stuff. He also expects therefore more emphasis on productive activity. Coming from a City economist this struck me as pretty big stuff.
From the union side, Jack Dromey gave a good rousing speech and said that Unite was looking into how it might do more work on capital stewardship. Tracey Rembert from the SEIU - who did a lot of great work on the First Group campaign back in 2006 - also spoke, this time about the recent engagement with Exxon. I also met up with a couple of good union reps on local govt funds, and seems that Unison's capacity building is starting to pay off. One of the reps in particular was very up to speed, which is a great sign.
Fund managers got a bit of a kicking. Everyone who spoke on the subject of how well managers address ESG (enviromental, social and governance) issues said that there was a wide variation in practice. In addition most of them don't actually do much beyond voting. Catherine Howarth from Fair Pensions put round and talked about their recent report in fund manager capabilities, and usefully this include some naming of names! This is all encouraging. For too long trustees have assumed that you can just delegate this stuff and managers will do it effectively. This is assumption is fatally flawed and finally it seems that trustees are getting the message. On the negative side, I also picked up on the fact that some institutions are actually letting go of their internal experts on ESG issues because of the need to cut costs. I think we're going to see a bit of a shakeout actually.
That's it for now. I've also got a couple of ideas that came together over the past few dates that I'll transform into posts shortly.