Investment pooling in the UK can drive still more value for the Local Government Pension Scheme (LGPS) in the future, according to new research.
It also shows that the benefits of scale in international markets have been demonstrated as “meaningful” and “realisable”, improving performance after fees, delivering better control over investments, and reducing costs.
The independent research was commissioned by seven UK LGPS pools – Access, Brunel, Border to Coast, LGPS Central, LCIV, LPPI and Wales PP – and covered 11 comparable investors in seven major international markets where the pooling process is more established.
The study acknowledges that there is no best practice for pooling, but does identify three themes that contribute to success. They are: contemporary governance, with divisions of responsibility, flexible decision-making and effective delegation; professional management that makes use of the pooling opportunity to bring together professional teams in a sustainable way to ensure effective training, development and succession planning; and long-term strategic planning and implementation where long-term strategic asset allocations are agreed and reviewed at least once a year.
The report also highlighted that clarity of central government objectives and of the pooling framework can both influence the pace at which pooling delivers value.