New research on asset pooling in major international markets has shown that UK pooling can add additional value to Local Government Pension Scheme (LGPS) funds in the future.
Seven UK LGPS pools – Access, Brunel Pension Partnership, Border to Coast Pensions Partnership, LGPS Central, London CIV, Local Pensions Partnership and Wales Pension Partnership – commissioned consultancy firm NMG Group to conduct the independent research.
The study, LGPS in the UK: learning from international peers, confirmed that the advantages of scale in international markets have already been demonstrated to be “significant” and “achievable”, resulting in improved after-cost performance, better control of investments and reduced costs.
Covering 11 comparable investors in seven major international markets where the pooling process is at a more advanced stage, the research sought to understand the issues and challenges encountered by these pools in their development.
There was a consensus among respondents that success was ultimately decided by long-term performance after costs against a benchmark set by stakeholders.
In addition, the study also found that realizing the benefits of scale could be accelerated by optimizing governance, and recruiting and retaining the right talent to take advantage of the pooling opportunity, both of which are necessary. to the implementation of long-term investments.
“Having clear and contemporary investment governance in place from the start provides the clarity, certainty and flexibility needed to help partner funds achieve the best long-term results for beneficiaries. These are common characteristics of pools deemed effective by their peers, ”he said.
The research report says governance is essential to any well-managed pension plan and respondents believe this is especially the case when it comes to pools, as additional stakeholders add layers of less complexity through mapping. concise roles and responsibilities.
Speaking on behalf of the commissioning pools, Mike O’Donnell, CEO of London CIV, said: “Pooling is really efficient in the UK – with operational pools and good progress in asset transition. So now is the perfect time to plan our next phase of development and the pursuit of our collective success.
Rachel Elwell, CEO of Border to Coast, said: “This research gives us powerful insight into how we can deliver even more value for LGPS over the long term. More importantly, it gives each pool and their partner funds an insight and understanding of how pools have thrived internationally, which will enable them to make the right decisions for their own trips.
Border to Coast announced in July that it was on track to achieve £ 250million in savings from its partner funds.