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Strategy

A collaborative relationship: co-investment survey

A collaborative relationship: co-investment survey

David Rowley
Tuesday 11th April 2017

The FCA wants pension funds to stand toe-to-toe with fund managers and co-investment would appear to put them on an equal footing. portfolio institutional quizzed 26 large UK pension funds about their ideal relationship with a fund manager and their appetite for co-investing. David Rowley reports.

A collaborative relationship: co-investment survey

"There are a number of managers over the years we have built close relationships with. We are still their clients, but we see the relationships more as partnerships."

Mark Thompson, HSBC Bank Pension Trust

A co-investment is a chance for a pension fund to look heroic to its members, the public and the industry at large.

It is seductive as the FCA has painted so many pension funds as chumps in their dealings with fund managers in its recent asset management market study. It can be nationalistic too. Richard Harrington’s speeches as pensions minister regularly cite his amazement at the Ontario Teachers’ Pension Plan’s purchase of the national lottery operator Camelot, when British funds lacked the scale to do so.

But most seductive of all are the good news stories. This is how former chief investment officer of Brisbane-based Sunsuper explained a deal he did back in 2013-14. “For some deals we help get off the ground there is a zero fee,” he said. “Managers would prefer to give that opportunity to their good clients, if it means they can do the deal rather than share with
another private equity firm. We had one co-investment where we put $15m in and within two months we got back $45m.”

Ten out of the 26 large pension funds portfolio institutional quizzed have done a co-investment, and a further fund is planning its first deal in 2017. In addition, 13 funds cited governance limitations as a reason they had not done a co-investment, while three cited being too small as their reason.

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