Pension pools warned on governance structures
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Local Government Pension Funds pools hoping to use a collective asset pool (CAP) structure will still be expected to create a single entity to make investment decisions, the government has made clear.
A number of pools are considering the structure as a cheaper and quicker method than the government’s preferred Authorised Contractual Scheme vehicle (ACS).
They also believe that the CAP model would allow more say for councillors in appointing fund managers, through a joint committee structure.
However, David Walker, head of LGPS investments at pension adviser Hymans Robertson, said: “The CAP model in theory does allow individual funds to retain ownership of their assets with individual investment agreements and collective savings negotiated with the managers.
“However, there is a question as to whether it meets the government’s wishes in terms of governance structure and where decision making sits.”
The CAP model is preferred by the £23bn South West pool – known as Brunel – but it is understood that government has advised the pool to look again at its plans.
In response, the councils involved are attempting to structure a hybrid model which would create a new entity regulated by the Financial Conduct Authority.
A report to the April meeting of the Devon Pension Board said: “Government feedback has encouraged the Brunel pool to review the joint committee approach, expressing the view that a structure regulated by the FCA would provide significant assurance to local employers, beneficiaries and co-investors.
“As a minimum they expect to see a single entity at the heart of any proposal, with responsibility for selecting and contracting with investment managers, as well as the employment of staff.
“Work is now being undertaken by the Brunel pool to align the preferred structure with the government’s expectations.”
Walker said: “There is legal opinion that a CAP can work as long as you have clear governance guidelines.”
Prospective pools have until July to firm up their proposals.
