Seven LGPS funds to pool £6.5 billion of assets

Seven members of the local government pensions scheme – Cheshire, Leicestershire, Nottinghamshire, Shropshire, Staffordshire, Warwickshire and Worcestershire – are to pool approximately £6.5 billion in assets.

The asset pool will be managed by Legal & General Investment Management (LGIM) following a manager selection exercise conducted by independent investment adviser bfinance. The pooled assets will, according to bfinance, see a fee saving of over 50%. The mandate covers passive equity, passive fixed income and smart beta strategies in the UK and internationally, and will allow individual funds to continue to track indices they were using prior to the appointment of LGIM.

A spokesman for the LGPS funds said: “Joining forces with other pension funds has enabled us to unlock significant savings and gives clear and tangible evidence of what can be achieved if LGPS funds are willing to work together and collaborate as equals.” The entire process, from initial discussions to an investment decision, took five months, following initial work carried out by Staffordshire, Cheshire and Shropshire. bfinance carried out a rapid selection process in less than two months, using evaluation criteria based on passive management, transition management and fees, pointing out that competition in the process led to fee reductions. The process was helped by political support for LGPS asset pooling.

bfinance managing director and head of client consulting, Pal Sarai, commented: “We welcome the group’s landmark investment in LGIM’s pooled funds and the excellent outcome of an extensive and rigorous selection process. Given this success we expect significant interest in similar arrangements from other local government pension schemes.”