Local Pensions Partnership Investments (“LPPI”) increased its annual net cost savings to £40.2m in the year to 31 March 2023, taking its total net cost savings since the pool launched to £153.2m, as CEO, Chris Rule, calls for more cross-pool collaboration.
The announcement comes as the Department for Levelling Up, Housing and Communities’ LGPS consultation reveals that since the implementation of pooling the LGPS has achieved net savings of £380 million, to 31 March 2022. LPPI’s net cost savings for the same period end amounted to £113 million, equivalent to 30% of the total LGPS figure. This is despite LPPI’s share of total LGPS pooled assets under management being 6%. The pool expects a similarly high contribution to savings compared to pooled assets under management for the year to 31 March 2023.
The improved savings results mean that LPPI now expects to deliver net cost savings of £200 million by 2025.
The key drivers for the improvement in net cost savings include:
- Growth of assets under management exceeding forecast
- Lower fees negotiated with external managers
- A growing portfolio of direct investment and co-investment to complement allocations to external managers
In addition to record cost savings, LPPI continues to deliver sector leading investment performance, achieving an average annual return of 7.9% over five years to 31 March 2023, the highest of any pool according to the Local Authority Pension Performance Analytics (LAPPA) report published by the Pensions & Investment Research Consultants Ltd (PIRC) and two points ahead of the average return of 5.9% across all LGPS pools.
From inception LPPI pooled 100% of client fund assets under a whole scheme management model which provides access to attractive investments in a cost-effective manner and increasing buying power to negotiate fund manager discounts.
Chris Rule, Chief Executive Officer at Local Pensions Partnership investments, says:
“We have been able to realise sector leading cost savings and performance largely due to having pooling scale from the outset. By managing all of our clients’ assets under a delegated model we’ve benefited from scale, flexibility and agile decision making since inception. But importantly, our partner funds don’t lose control – they retain sovereignty of their fund’s strategic asset allocation while we provide expert advice and a focussed range of asset class options.
“The government consultation suggests that LGPS funds should have the flexibility to invest through their own pool or in another pool’s investment vehicle, and we would absolutely welcome more of this type of cooperation and partnership in the future. We believe that more direct investments into other pools would also remove the need for feeder funds and the associated costs.
“Our partner funds have benefitted from LPPI’s involvement in two significant cross-pool collaborations – GLIL Infrastructure and The London Fund. These collaborations have allowed us to achieve fantastic results alongside other pools and funds, and we’re always talking to our clients, partners, and peers to find new ways of working together.”