Lancashire County Pension Fund and the London Pensions Fund Authority have announced plans to pool their £10bn of assets in a bid to compete with “enormous” international sovereign wealth funds for illiquid investments.
The Asset and Liability Management Partnership, will see each pension fund retain its separate identity and local accountability and help lower costs and improve performance. It could also ultimately cover all areas of activity involved in the running of the pension funds, including pension administration.
The central proposal is to create a commonly-managed, jointly invested pool of assets overseen by an FCA-registered entity created by the two pension funds. This will provide benefits of scale and allow direct investments in asset classes such as infrastructure and private equity, while ensuring ensure industry-leading standards of governance, the schemes said in a joint statement.
The partnership will build on existing expertise and increase co-operation and collaboration between the pension funds, the statement added. It will put into practice the views expressed by both pension funds in their responses to central government on the reform of the Local Government Pension Scheme.
LPFA chairman Edi Truell, said: “We are delighted to be working on the development of this partnership and believe, with a greater pool of assets, both pension funds will gain access to a wider range of investments. It is especially important to compete for desirable illiquid investments against the enormous international Sovereign Wealth Funds and pension investors.
“We firmly believe that large scale Asset and Liability Management Partnerships are the best way to deal with the challenges faced by UK pension funds.”
Lancashire County Council leader, Cllr Jennifer Mein, added: “Taking a more proactive approach to managing the assets and liabilities of the Lancashire County Pension Fund has really paid off in recent years and this new partnership will enable us to build on the expertise we have developed.
“Facing the challenges of supporting an ageing population, the government should be using the good practice of funds like our own and the London Pension Fund Authority to drive up the performance of the Local Government Pension Scheme, rather than dumbing down to the average.”
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