mast image

Special Report

Impact investing

Sections

Brunel sheds light on LGPS pooling work programme

A collaboration of UK public pension funds has given insights into the varied and intense work that was involved in setting up the £28bn (€30bn) asset pool’s newly created investment company.

Brunel Pension Partnership (BPP) Limited was formally incorporated on 18 July and, subject to regulatory authorisation, will act as the operating company for the management of the assets of 10 local government pension schemes* (LGPS) that formed the partnership.

It expects to eventually have around £28bn of assets under its control.

In a statement published earlier this week, BPP listed the firms it worked with and descriptions of the roles they played, although it is not clear to what extent these were written by BPP or the firms themselves.

Nonetheless, the descriptions make clear that preparations for pooling have been multi-faceted, with outsourced services ranging from legal or financial advice to human resources and organisational consulting.

They underline the attention that was paid to the costs that could be both incurred and saved as a result of pooling.

For example, asset transition costs were analysed in advance of the February 2016 government deadline for the LGPS to submit initial pooling proposals.

This work, carried out by BlackRock’s transition management team, included estimating costs by each asset sub-class and in total for the pool, analysing how estimated costs changed given different manager choices, and what the cost attribution would be to each underlying scheme.

Russell Investments also provided cost analysis ahead of the initial submission to government. The company estimated the potential spread of costs that would be incurred when transitioning to the pool.

Consultants bfinance were commissioned to carry out an independent review of Brunel’s investment proposition to determine “the potential fee savings that could realistically be expected in the relevant investment sectors as a result of asset aggregation, as well as prospective transition costs and other elements”.

In its July 2016 submission to the government, BPP had said it envisaged asset pooling would generate net savings of £13m per year by 2021. 

People matters

It is well-known in the UK pensions industry that delivering on the government’s instruction to pool assets has been an intensive and challenging process for those working in the LGPS, and this is hinted at in the description of the work carried out by JLT.

The consultancy was commissioned – as part of a partnership with Alpha FMC – to provide specialist support to the partnership after “it was recognised that the group of officers from the underlying LGPS in Brunel, while working to establish the pool, had limited capacity yet were still required to also focus on their ‘day jobs’,” according to BPP’s note.

In a newsletter update a year ago, Brunel said its team had already completed “nearly 2,500 man hours on the project” between April and August on top of their day jobs.

Dawn Turner, then chief pensions officer at the Environment Agency Pension Fund, one of the BPP founder members, switched to working full-time on the development of the Brunel company in her capacity as project executive. Turner was recently named chief executive officer of BPP Ltd.

JLT hired Nick Buckland from another founder fund, Dorset, a year ago. Since May this year Buckland has been spending on average three days a week on the project, including attending meetings in Bristol, where the partnership is based.

Another strand of work that BPP’s statement highlighted was that of providing advice on legal documentation to the individuals that would become officers and/or directors of the formal management company – a new set of responsibilities for many of the staff. Eversheds Sutherland’s work in this regard included reviewing and advising on the articles of association and terms of reference for various committees, given the company’s plans to be authorised by the Financial Conduct Authority.

*LGPS funds for Avon, Buckinghamshire, Cornwall, Devon, Dorset, the Environment Agency, Gloucestershire, Oxfordshire, Somerset, and Wiltshire.

Have your say

You must sign in to make a comment

IPE QUEST

Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2546

    Asset class: Real Estate Equity Fund (non listed).
    Asset region: Europe.
    Size: Total CHF 600m, approx. CHF 100-300m per fund investment.
    Closing date: 2019-06-28.

Begin Your Search Here
<