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Funds face tobacco investment dilemma

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A senior finance expert has backed the decision of council pension funds to invest in tobacco companies, after the sector faced criticism from public health lobbyists.

Speaking at the LGC investment summit, Warwickshire CC pension fund manager Phil Triggs said local authority funds would have been much worse off had they taken a moral stance on investing in tobacco firms.

“If you had excluded tobacco companies over the past 30 years, your investment returns would have been shattered. They have been the best-performing share,” he told the summit delegates at Celtic Manor hotel, Newport.

Mr Triggs admitted there had been pressure on funds not to invest in tobacco stocks but insisted it was not up to them to “take a moral stance”.

“There is no easy answer because tobacco companies have been very strong performers in investment portfolios. There is pressure for local authority pension funds to disinvest

from tobacco stocks because many councils promote active tobacco reduction programmes but the pension fund has to make the best return on its investment,” he said.

“It is for the pension fund to act in the constraints of what is legal, not take a moral stance,” he added.

Kent CC’s pension fund was criticised by campaigners last month for investing nearly £24m in tobacco firms, despite promoting antismoking initiatives on its website.

The authority defended its holdings in the cigarette giants, which it said comprised only 1% of all its investments and that it had a duty to get the best return for its members.

Public health campaigners were critical of Kent. Martin Dockrell from the charity Action on Smoking and Health told LGC many council workers found it “very frustrating” that they spent their days trying to undo the harm caused by the tobacco industry but were given no choice about investing in it.

“It is true that fund managers are obliged to get the best return for their pension holders but this does not mean they are obliged to invest in tobacco companies. The tobacco industry has a highly questionable long-term future,” he said.

Mr Triggs also addressed the call for some of the 99 regional local government pension funds to merge.

He told LGC it was a live issue in London, where there were “a good number of smaller funds” and that “discussions on the prospect of merging funds in Wales are taking place”.

Any proposed merger plans in Wales are likely to meet resistance from some higher performing funds.

Sian Thomas, a Dyfed pension fund trustee and chair of the Plaid Cymru Councillors Association, said: “The issue is likely to re-emerge because [Welsh Assembly Member for local government] Carl Sargeant is interested in it. Why would [Dyfed] want to merge when we are one the best performing funds?”

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