The eight investment vehicles that manage pension assets for town halls in England and Wales have told ministers they want to remain independent entities, in a setback to the government’s plans of driving economies of scale.
The “pools” that manage money for the £392bn Local Government Pension Scheme (LGPS) told the Financial Times they had presented the government with a business case for why they would deliver best value by operating independently.
The government has said all 86 local authority funds must hand over all of their assets to their partner pool, and that the pools must be set up as investment management companies authorised and regulated by the Financial Conduct Authority, with expertise and capacity to implement investment strategies.
This is not mandated, the LGPS local authorities should give up making local decisions, the pools should be managed by the FCA and ultimately they should form into one single investment company not unlike the IFM Investors that Nest has purchased a tenth of
Nest set to acquire 10% ownership stake in IFM Investors to boost UK private market investments
The truth is that we can be local and global through a world class investment house but LGPS cannot properly exercise its now £400bn of assets when 8 pools compete with each other. There are not many global players working in the fiduciary space with the clout that LGPS could have and most are American. If we are to have the ambition to be globally good, then we have to have the kind of ambition that the Government has for LGPS.
The Government , through its statutory promise, gives LGPS a unique opportunity to invest 10o% of its money for the long term and show the rest of Britain’s funded pension system what can be achieved when taking risk off the table at every point.
The failure of local authorities and their fund managers to properly invest was made clear to me when I sit through a morning of investment platitudes at Methodist Hall last week,
I was asked by FT’s Mary McDougall, the writer of this piece, what my thoughts were. I am independent of this (other than paying Council and Income Tax) and my response was straightforward
Turkeys don’t vote for Christmas.
A broadly geographical system
Most of the pools questioned argued that it would be expensive to pool. The Treasury sees their being long term advantage of them doing so. Some of the pools manage money themselves (Border is the best example) while others simply choose other managers (Northern only manages 4% of funds). Unsurprisingly, Border – having a reputation for doing the job – are keen to get on with consolidation and Northern are not.
I am not publishing the information about Pools performance, their size or their regular popularity by local pension authorities, I have included a share link to FT and if you email me, I will get a further link if the original link runs out.
This is not the kind of conversation that should go on behind LGPS doors between them and Government, we need to see this money being put to best use by the pension funds for all council and national tax-payers. We should see the statutory promise to pay pensions release pension schemes to invest for growth and not whinge about taking risk off the table.
We are led to believe that Torsten Bell is still pro consolidation and merged investment facilities to make Britain Great again. We need to make it clear to him when we meet him this week and next when he speaks to us, that we want pensions to do everything it can to help a bigger aim of Government.
That includes England and Wales and I hope Scotland and Northern Ireland too. Well done the FT , the consultation about and for the Pools ended last Saturday (March 1st) and I hope it will be Britain and not the Turkeys that win.