UK - Seven English local authorities are to jointly tender a national framework agreement for investment consultancy services in a move that could see as much as 70% of the local government pension schemes’ (LGPS) assets covered by national framework agreements, according to consultants.
The prior information notice published by the county councils of Norfolk, Northamptonshire, Lincolnshire and Buckinghamshire, as well as the London councils for Hackney and Croydon, said it would look to establish a national framework agreement “available for use by all LGPS Administering Authorities and their equivalent bodies in the UK”.
Some of the tasks those appointed to the framework agreement might be asked to do would be reviewing of investment strategy and investment management structure, monitoring and reporting of investment managers and producing quarterly reports based on data provided by the measuring company.
Additionally, investment consultants could be asked to attend committee meetings, advise on the statement of investment principles and advise controlling investment costs including fees and transaction-related costs.
David Crum, a former CIO at Strathclyde Pension Fund, who recently launched 330 Consulting, told IPE about the proposed national framework several months ago.
At the time, he said the new national framework would “keep [investment managers] on their toes” and revert power back to local authorities.
“The good thing about doing this is that it will ensure the service providers really have to raise their game when it comes to customer service,” he said.
“One of the problems of the public sector has been the time taken to go out and replace service providers - the average tender takes about nine months - so it’s a long, laborious, technical process and a disincentive to change incumbents.”
Crum said the problem with wide-ranging framework agreements such as the one proposed was that it needed to cover “every eventuality” of the more than 100 local government schemes in the UK.
“Things like passive equities are relatively straightforward to capture in a framework agreement, but perhaps infrastructure, private equity or single-strategy hedge funds will be a bit harder to wrap up in one agreement meeting everybody’s requirements.”
He added that custody was another likely candidate to be included in future national frameworks, with transition management also “relatively straightforward” if covered in similar arrangements, as well as the “relatively homogeneous” UK commercial property market and global unconstrained equities.
However, Crum speculated that, even if some areas would have to be excluded due to funds’ differing needs, frameworks could nonetheless cover around 70% of LGPS assets.