mast image

Special Report

Impact investing

Sections

Engineering lobby pushes for LGPS infrastructure platform

Related images

  • Engineering lobby pushes for LGPS infrastructure platform

Related Categories

UK - Consolidation of the UK's local authority schemes could raise £6bn (€7.6bn) for infrastructure investment, the country's lobbying group for the engineering industry has suggested.

The Association for Consultancy and Engineering (ACE) suggested that local government pension schemes (LGPS) should set aside around 5% of assets for infrastructure projects, while acknowledging in its report - 'Pensions and infrastructure: Balancing risk, reward, return and market conditions' - that the industry was unlikely to increase its exposure "significantly" in the immediate future.

The proposed consolidation comes not long after London's councils debated pooling the assets of the capital's 34 funds.

The proposal, backed by the London Pensions Fund Authority's chief executive Mike Taylor, had not gone far beyond the initial debate, Taylor today told IPE.

The ACE's chief executive Nelson Ogunshakin noted that the fragmented nature of the local government system meant no single fund had "the capacity to invest in a significant infrastructure project".

But he said that creating a platform through which the funds could potentially commit 5% of assets would be one solution.

The engineering group's report also welcomed the National Association of Pension Fund's work with the Pension Protection Fund to launch its own infrastructure vehicle, but acknowledged that how the fund interacted with the market would be important.

"Its potential alignment with other investment methods - such as listed funds, unlisted funds, listed equity or unlisted equity - will determine how pension funds consider its return/risk ratio and the degree to which funding can be diverted into the platform," it said.

The report added that, due to the need for a "cultural change" among pension funds as a whole, it was unlikely the industry would be able to participate in many of the projects outlined in last year's National Infrastructure Plan.

"However, in the medium to long term, as a source of finance, they could prove to be valuable," it said.

Speaking with IPE today on the viability of merging or pooling local authority assets, Taylor said that while the proposed London project - which would create a £30bn London Pensions Mutual, as well as a £2.5bn London Infrastructure Investment Vehicle - had been debated, further detailed work requested by the capital's council leaders had not yet got underway.

Asked how feasible less local control over pension assets was at a time when the government was emphasising more local accountability and control for a number of public services, Taylor said it opened up the debate on the meaning of 'localism'.

"It is that issue with localism," he said. "What does localism mean, and when does the 'value for money' consideration take over from the local consideration?"

He added that mergers or pooling of fund assets should nonetheless be part of the "longer-term" value for money and governance debate among the local authority schemes, dismissing claims his organisation stood to gain from greater integration.

"The LPFA is a statutory body - like everything else, we would be abolished, and a new organisation would be formed to run it," he said.

"The vested interest arguments are more 'I can do it better than anyone else can' and I don't think that's necessarily true at the level of the funds around at the moment."

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-2559

    Asset class: Multi Assets.
    Asset region: -.
    Size: EUR 15m (may be split into two mandates EUR 7.5m).
    Closing date: 2019-09-06.

  • QN-2560

    Asset class: Private Equity.
    Asset region: Global.
    Size: $40m.
    Closing date: 2019-08-30.

  • QN-2561

    Asset class: Infrastructure.
    Asset region: Global.
    Size: $40m.
    Closing date: 2019-08-30.

Begin Your Search Here
<