The £5.2 billion Lancashire County Pension Fund and the £4.9 billion London Pensions Fund Authority (LPFA) have announced a new asset and liability management (ALM) partnership, which will pool over
£10 billion in assets in an effort to save costs and improve performance.
A key part of the partnership will be the creation of a commonly-managed, jointly-invested pool of assets which will be run by an authorised manager created by the two pension funds. Each fund will maintain its own identity and local accountability.
Lancashire County Council leader, Councillor Jennifer Mein, commented: “Taking a more proactive approach to managing the assets and liabilities of Lancashire County Pension Fund has really paid off in recent years and this new partnership will enable us to build on the expertise we have developed.” LPFA chairman, Edi Truell, said: “We are delighted to be working on the development of this partnership and believe, with a greater pool of assets, both pension funds will gain access to a wider range of investments. It is especially important to compete for desirable illiquid investments against the enormous international sovereign wealth funds and pension investors. We firmly believe that large scale asset and liability management partnerships are the best way to deal with the challenges faced by UK funds.”
The announcement comes after government proposals for greater use of passive investing in the LGPS as a way of savings costs. The government is understood to have rejected the option of scheme mergers due to the difficulties of doing this before the next general election. A number of other local authority pension funds, including most of the London boroughs, are working on a common investment vehicle approach, which would allow funds to co-invest in the major asset classes in order to drive down investment fees through economies of scale.