London CIV to hold over one-third of assets outside pooling structure

The London CIV, the pooling vehicle for the UK capital’s 33 local government pension schemes (LGPS), expects expects that more than one-third of its assets will be held outside the pool as it pushes ahead with its collaboration.

Outlining how the collective investment vehicle would manage assets for its member LGPS, the pool noted it had already begun setting up a number of dedicated sub-funds for its members, a move that has already seen more than £6bn (€8.5bn) transferred away from existing mandates.

However, it noted that a significant amount of member assets – largely illiquid investments – would remain outside the pool, at least until it was able to establish fund structures able to hold them.

It said that, until an Authorised Contractual Scheme – a UK tax-transparent fund structure – was established, illiquid assets amounting to 12.6% of overall AUM, or £3.8bn, would remain outside the pool “in the short to medium term”.

More than half of the £3.8bn in assets is invested in property, with £600m each in private equity and hedge funds.

The CIV said a further £200m was invested in infrastructure, and £300m in unspecified other illiquid assets.

However, the CIV added that a further £7.5bn invested in life policies – equivalent to nearly 26% of assets – would also now remain outside of the CIV, after the government decided to grant an exemption from the requirement to pool the asset class.

“Whilst recognising that a proportion of these can continue to be held at a local level as life policies,” the CIV’s consultation response to the Department for Communities and Local Government (DCLG) said, “the CIV at a pool level will provide the management and reporting for these assets.”

The consultation was submitted to DCLG in mid-July, bringing to an end months of planning by English and Welsh LGPS to set up eight asset pools as large as £35bn.

The CIV’s consultation also touched on projected staffing levels, saying it was budgeting for 12 full-time equivalent staff members.

“However, it is recognised that, as assets under management grow and the complexity of those assets increases, there will be additional resourcing requirements that could see staffing at least double over the next few years,” it said.

It noted that, based on research by CEM Benchmarking, once it began overseeing all assets held by the 33 LGPS, it would be in line with the pensions industry to hire 10 investment staff and a further 18 staff in support and governance roles.