Flintshire Council pension fund manager fees increase by £6 million

The amount of management fees taken out of a council’s pension fund has shot up by £6 million in a year, it has been revealed.

The Clwyd Pension Fund for Flintshire County Council employees spent more than £23.5m on management expenses during 2017/18, compared to approximately £17.5m the previous year.

The figures were disclosed at a meeting of the authority’s audit committee this morning (Wednesday 11 July) where one member queried the sharp rise.

The council said the climb in fees was because of the number of investments it made during the year, and also due to the fact that fees increase based on the fund’s value.

Peter Worth, who prepared the accounts on the authority’s behalf, said the fees were high, but also being closely monitored.

He said: “Management expenses increased by £6m for the reason that there has been an increase in ad valorem fees based on the value of the fund, which means that as the fund value increases, their fees increase.

“Funds also expanded into some additional investments in private equity and infrastructure.

“I would say that the fees that the fund faces are at the higher end of the range, but that reflects the investment range that the portfolio has.”

In a report, the council said that management fees are subject to improved transparency following a number of regulatory changes.

However, co-opted committee member Sally Ellies questioned why fees had increased at such a level when the fund’s growth dropped from £318m in 2016/17 to £87m in the last financial year.

Ms Ellis said: “I understand the explanation that you’ve given and the remarks made about costs being at the high end due to the nature of the investment, but how is this monitored though, as the increase in management expenses is clearly higher than the value it increased by.”

In response, Mr Worth said: “You have a lot of relatively small tranches of investment that comprise of private investment and venture capital. You ask any business there is a fixed fee for engaging.

“If you’re invested in relatively small amounts of money you will incur proportionately higher fees.

“There’s a balance to be struck between all of those and I think its an area where its easy to focus on cost, but it’s time to make the link between the return you’re getting and the risk side of things.”

Chief executive Colin Everett reassured members that the management of the pension fund was being scrutinised and that it was performing well.

He said: “In relation to management fees, it’s always a challenge and quite rightly so and it might be worth us bringing a paper to you to explain it.

“The pension committee’s grasp of the issues is very strong. We are quite different to the other seven pension funds, we have a different risk appetite, but we actually deliver our returns well. Performance is good, and we’ve taken risks for the benefit of the fund.”

The committee unanimously voted to note the report.

By Liam Randall – Local Democracy Reporter.