LGPS urged to accelerate pooling of assets

All parties involved in Local Government Pension Schemes (LGPS) should work together to accelerate the pooling of assets, Local Pensions Partnership Investors (LPPI) has said.

LPPI CEO, Chris Rule, called for the acceleration in pooling, stating that it is necessary “to fully release the benefits for which pooling was intended”.

Rule also stated that understanding the impact that pools are having on LGPS pension portfolios is “crucial” in keeping the original pooling objectives alive and enabling future innovation.

“We have successfully blended dedicated in-house specialist expertise, delegated implementation, and co-operation with like-minded investors to fully exploit the benefits of pooling,” Rule continued.

“Our model has enabled our partner funds to continue to control their strategic investment activity, including determining their asset allocation, whilst also creating access to an aligned expert adviser with in-house implementation expertise at scale.

“Across the LGPS there is much more to do, and I encourage all in the sector to work together to achieve the goal of full pooling of assets within the respective pools.”

Indeed, LPPI also revealed that it increased its annual net cost savings by more than £10m per annum to £39.1m in the year to 31 March 2022.

In particular, the net costs saved through pooling, and a focus on direct investments and internally-managed portfolios, increased from £28.2m to £39.1m, bringing cumulative savings up to £113m since its inception in 2016.

Based on this, the business also revised up projections, confirming that it is now expecting to deliver net cost savings of more than £200m by 2025, more than £350m by 2030, and more than £500m by 2035.

LPPI confirmed that it has pooled 100 per cent of client assets, enabling access to attractive investments in a cost-effective manner, particularly in private markets, and increasing buying power to negotiate fund manager discounts.

Key drivers for the improvement in net cost savings according to the business included growing assets under management, lower fees negotiated with external managers, and a growing portfolio of direct investment to compliment allocations to external managers.

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