The Royal County of Berkshire Pension Fund is to join the £1bn (€1.1bn) infrastructure platform to be set up by the Local Pensions Partnership (LPP) and the Northern Pool, two of the UK’s eight local authority pension pools which are being launched to enable increased infrastructure investing.
Berkshire joined the LPP – whose other partners are London Pensions Fund Authority (LPFA) and Lancashire County Pension Fund (LCPF) – earlier this summer, with its participation expected to be formally approved by end-January 2017, and assets transitioned by April 2018.
The value of the three funds’ combined investments is currently around £13bn.
However, according to LPP’s pooling proposal submitted to the UK government in July, Berkshire wishes to retain certain locally-focused investments permanently outside the pool and will seek its own approval from the secretary of state to do this.
At present, this intention relates to Glassford, a joint venture with Housing Solutions, a housing association based in Maidenhead, Berkshire. The pension fund said it intends to expand this joint venture to develop additional housing schemes in the neighbourhood.
The submission also said that in principle any future asset management agreement between the pool’s investment vehicle LPP Investments (LPPI) and Berkshire will be able to accommodate a percentage of assets to be allocated to local investments for the pension fund’s sole benefit.
These could either be managed via LPPI on an advisory basis, or with Berkshire’s own resources.
In terms of infrastructure, the target allocation for LPP could be as high as 10%-plus, with Berkshire planning to increase its own allocation to a maximum of 15%.
In January 2015, LPFA and Greater Manchester Pension Fund (GMPF) – now part of the Northern Pool – established an infrastructure joint venture, which is being expanded this summer to include the pair’s pooling partners to lift total commitments to over £1bn.
By end-2016, it is also planned to restructure the joint venture into an infrastructure fund open to every local government pension scheme pool or fund.
Meanwhile, based on just the LPFA and LCPF participation so far, the LPP said it expects to save £33m in investment management fees over five years from pooling, and around £1m in pension administration costs in the second year of operations.
It also said it anticipates improved investment outcomes of around £20-£30m from current levels over the next five years, and that even greater savings should be achieved with the addition of Berkshire to the pool and the opportunity to exploit further economies of scale.