RATIONALISATION
The £36bn Border to Coast Pensions Partnership comprising 13 LGPS members is similarly opting for a CIV structure that will have the authority to make decisions on manager selection, vehicles and structures on behalf of the member funds. Speaking to PI earlier this year, Surrey County Pension Fund strategic finance manager, pension fund and treasury, Phil Triggs, said the administering authority would execute the governance requirements of running a pension fund, such as asset allocation, key performance indicators, risk management and the basic
administration of the fund. The pool will have the templates of 13 different funds’ asset allocations and will collate and invest on that basis.
He added: “I think it would be entirely possible that in order to create efficiencies there will be some rationalisation of fund managers across the piece.”
According to the £35.4bn Northern Powerhouse pool’s submission, participating authorities currently manage around £10bn of listed assets in-house, but alternative
assets will be managed by an operating company functioning as an Alternative Investment Fund Manager (AIFM). This will allow the pool to operate CIVs in alternative asset classes.
PARTNERS, NOT CLIENTS
So are asset managers concerned by this streamlining of assets and the subsequent competition for mandates, or will it create opportunities? JLT senior consultant Andrien Meyers, who contributed to the formation of the London CIV in his former role at the Lambeth Pension Scheme, believes competition will increase among managers for fewer but larger mandates.
“As an investment manager you might have been looking after four different lots of £150m mandates for four different clients and now you’re not,” he says by way of example. “Now there is a pot of £600m for one client so obviously you are either going to win big or lose big.”
Perhaps unsurprisingly, many managers believe pooling will create an opportunity for them to work in partnership with the pools rather than in a typical client-provider relationship. Some believe this will take shape as the pools grow larger and insource more of the bread and butter investments, such as vanilla equities and bonds, and use third-party managers for more
specialist strategies and asset classes.
Goldman Sachs Asset Management (GSAM) head of UK institutional business David Curtis believes pooling presents a big opportunity because there are parallels with other large institutions around the world which GSAM already manages money for such as sovereign wealth funds.
“People are starting to use the words ‘UK Sovereign Wealth Funds’ and we work with the largest sovereign wealth funds around the world and our engagement with them is deep, extensive and continual,” he says.
Curtis adds increasing scale will lead to schemes carrying out some investment functions internally, but for others they will look to partner with external providers. “We think we are rather well positioned for that and we have been resourcing up our team here in the UK to make sure we are,” he says.
Unigestion business development director Michel Bernard agrees that pools will look to external managers for the more sophisticated ideas. “That is where we want to work with them,” he says. “Not as product providers but as partnership providers.”
