While the UK, and much of Europe, was focused on the
political fallout from Brexit (Boris Johnson? Seriously?), last week also saw
final plans submitted for eight collaborative projects among the country’s
The planned asset pools are the result of an ambitious concept
launched by former Chancellor George Osborne last year to scale up resources
across local government pension schemes (LPGS), save
money on fees, and invest more in the UK’s infrastructure.
Some, like the London
Collective Investment Vehicle (CIV) and the Local
Pensions Partnership (LPP), were well advanced when Osborne’s plan was made
public. Welsh local authority pensions had been collaborating informally for
some time. Other pools have come about in record time, reshaping the public
pension landscape in England and Wales.
Source: 2014/15 annual reports. Infographic by Sam Syed.
The chart above shows aggregate investment management
expenses for each group during the 2014/15 reporting year. Despite criticism from
industry commentators that the LGPS as a whole is expensive, aggregate investment
fees amounted to less than 0.5% of pool assets in each case.
The London CIV claims already to have halved its costs on
pooled assets, while a report published in January claimed the collaborations
could save between £190 million and £300 million ($250 million to $394 million) a year.
The government intends for each pool to be at least £25
billion in size. Documents from the Wales
pool indicate that Marcus Jones, minister for local government, has given
the eight funds his blessing for a smaller pool of £13 billion. The LPP is in
talks with the three Northern Powerhouse funds—Greater Manchester, Merseyside, and West Yorkshire—to formalize a link-up for
their combined £48 billion.
The submissions have yet to be publicized, but letters from
Jones—whose Department for Communities and Local Government is overseeing the
pooling developments—to three of the pools indicate that the London CIV’s
structure is the government’s preferred option.
Julian Pendock, CIO of the London CIV, is establishing sub-funds based on common mandates across London’s 33 local borough
pensions. It has already pooled assets worth £8 billion.
The next deadline the pools have to meet is April 2018, when
the government wants the transfer of assets to the new
structures to begin.
In the meantime, negotiations are underway to build a
nationwide infrastructure platform across all pools. This includes a proposal
from the Northern Powerhouse to create a clearing house for infrastructure assets.
“The general concept is to avoid loss of value through pools
competing against each other for infrastructure deals,” stated the Northern
Powerhouse funds in their initial submission to government in February.
The clearing house would seek to identify projects suitable
for direct investment by the LGPS, perform initial due diligence, gather
funding commitments, and act as agents on behalf of the LGPS once investments
On the Infrastructure Big Boys & Access
to Success? More Public Pension Pools Emerge