THE GOOD WILL OUT
Kames Capital head of institutional sales Shaun McWilliam believes there will be opportunities for good fund managers with decent strategies to target the newly-formed bigger pools of cash. The challenge, he adds, is about understanding how the pools work and who the decision-makers are.
Kames already manages money for a number of local authority schemes and recently launched a property fund for which the seed investor was West Midlands Pension Fund. Kames is hoping to leverage the existing relationship with West Midlands in order to begin conversations with other members of the Central pool and build business that way.
“We are talking to the other members of the pool and hopefully getting collaboration from them, and hopefully they will come into the fund,” he says. “It helps they are all part of the same group.”
CAPACITY
But, Aon Hewitt head of public sector investment consulting Dave Lyons suspects not all managers will be leaping headfirst into the pools. Some, particularly smaller active specialist players with good track records, might decide this large capacity environment is not right for them.
Lyons explains: “If there is a very good active manager who has capacity constraints on their strategy, they are going to be slightly more reluctant to allocate a large amount of capacity because these pools are going to be big and getting a meaningful allocation to an active manager or strategy is going to mean a lot of assets.
“This could actually reduce competition,” he continues. “Perhaps these managers will want to sell that capacity at a slightly higher rate to a broader range of investors than just one or two pools.”
Unigestion is a $20bn manager with eight LGPS funds among its clients, but Bernard is not fazed by the capacity issue.
“That is not a concern,” he says. “Our largest clients are not in local authorities right now. If we suddenly have one client doing 10% of our assets I can see it as a problem, but I don’t see a £20bn fund putting 20% of its assets with one manager.”
