Final shape of LGPS pool bids revealed

Only five out of eight proposed bids for Local Authority Pension Fund pools will meet the government’s proposed £25bn threshold, Room151.co.uk has learnt.

Tomorrow (Friday) is deadline day for the submission of proposals in response to chancellor George Osborne’s call for six pooled funds of around £25bn each.

Room151 has confirmed details of all eight groupings (full details below), with each of them understood to have met separately with Treasury officials over the past week to explain their proposals.

On £23bn, the South West grouping is only marginally short of the benchmark, while the eight Welsh councils, on around £12bn, will feel they have a good case to be treated separately from English authorities.

However, the existing ALM Partnership between London Pensions Fund Authority and Lancashire has managed to attract only one extra fund – the £1.17bn Berkshire fund – bringing its total to just £13.71bn.

David Walker, head of LGPS investments at adviser Hymans Robertson, said: “There are still some questions as to what happens to the funds that are short of the target. I think it might depend on how far away they are.

“The ALM fund may be under some pressure, although they have gone a fair way to putting infrastructure in place.

“Their initial offer was to manage assets on behalf of funds, while others were offering an equal share of pool structures. They did change their stance later in the process, but by then many had already committed to other pools.”

The largest proposed pool – named Border to Coast – weighs in with assets of £36bn.

Fiona Miller, senior manager of pensions & financial services at Cumbria Pension Fund, one of the instigators of the Border to Coast pool, told Room151: “Considering our offer was a bit different, in that it was never based on a geographical grouping, it has been very pleasing that we managed to find so many like-minded funds.”

She said that three of the funds in the proposed pool manage the majority of their assets internally, but that “for many, the ability to access that capability was an attraction”.

She said that the pool would operate on a one-fund-one-vote basis, but the exact legal structure was yet to be decided.

Conversations between Border to Coast and the £35.67bn Northern Powerhouse pool have already begun on collaborating on infrastructure investment.

The only fund yet to commit to a pool is in Hertfordshire, with both the ALM and £30bn ACCESS pool still hopeful of wooing the county.

However, a third party review of Hertfordshire’s pooling options is not expected to present its recommendations until March.

Hugh Grover, chief executive of the London collective investment vehicle (CIV), which currently has assets of £27.6bn, said: “No other non-London funds have joined with us at the moment but we remain open to discuss options with any colleagues that wish to engage and, of course, are available to other non-London funds that may wish to invest through us to benefit from our reduced fee scales.”

Currently, 31 of the capital’s 33 boroughs are participating in the CIV. The proposal put to government by Grover’s team said: “If all London LGPS funds were to participate, which it is hoped they will, total assets would increase to £29.1bn.”

Walker added: “There has been a lot of effort and work, and a lot of collaboration in a short space of time, which shows the capabilities of the sector.

“However, there are still some questions as to what happens next to make this work.”

Refined and completed submissions on pooling must be submitted to government by 15 July.

UPDATE, Friday 19 February: The ALM Partnership today confirmed that it is in discussions with the Northern Powerhouse about “ how to best work together using the very significant in-house expertise of all the participants”.

List of proposed LGPS pools

Border to Coast
Funds: 13
Combined assets: £36bn
Pool members: Bedfordshire, Cumbria, Durham, East Riding, Lincolnshire, North Yorkshire, Northumberland, South Yorkshire, South Yorkshire Transport Fund, Surrey, Teesside, Tyne and Wear, Warwickshire.

Northern Powerhouse
Funds: Three
Combined assets: £35.67bn
Pool members: Greater Manchester, Merseyside, West Yorkshire.

Midlands
Funds: Nine
Combined assets: £35m
Pool members: Cheshire, Derbyshire, Leicestershire, Nottinghamshire, Shropshire, Staffordshire, West Midlands Integrated Transport Authority, West Midlands Pension Fund, and Worcestershire.

ACCESS
Funds: 10
Combined assets: £30bn
Pool members: Cambridgeshire, East Sussex, Hampshire, Isle of Wight, Kent, Norfolk, Northamptonshire, Suffolk, West Sussex. Plus one more unnamed fund.

London CIV
Funds: 31 or 33
Combined assets: £27.6bn-£29.1bn
Pool members – 31 participating London boroughs. Two have yet to sign up.

South West
Funds: 10
Combined assets: £23bn
Pool members: Avon, Buckinghamshire, Cornwall, Devon, Dorset, the Environment Agency, Gloucestershire, Oxfordshire, Somerset and Wiltshire.

Wales
Funds: Eight
Combined assets: £12.3bn
Pool members: Carmarthenshire, Cardiff, Flintshire, Gwynedd, Powys, Rhonda Cynon Taff, Swansea, Torfaen.

ALM Partnership
Funds: Three
Combined assets: £13.71bn
Pool members: Berkshire, Lancashire, London Pensions Fund Authority

Uncommitted
Hertfordshire