Lothian Pension Fund is to push ahead with the launch of a standalone company to accommodate its in-house investment staff, following approval from its administering authority.
The £4.3bn (€5.2bn) scheme had its plans approved by the City of Edinburgh Council a month after the fund itself backed the launch of one or more special purpose vehicles (SPVs).
Lothian’s in-house team currently manage over 60% of the fund’s assets, and earlier this year said it would seek approval from the Financial Conduct Authority (FCA), a step that would allow its team to complete investments without seeking advice from consultants.
A spokeswoman for Lothian confirmed to IPE that Thursday’s council meeting had signed off on the launch of the SPVs, but noted that the plans to move the fund’s investment staff to the new vehicle were still subject to a consultation and agreement with the relevant unions.
A report prepared for the meeting by Alastair Maclean, director of corporate governance at Lothian, said that 11 staff would initially transfer to the SPV.
The SPV would draft a “formal and transparent” remuneration policy for staff, addressing concerns that the fund could lose skilled employees to other Edinburgh-based financial institutions.
The Scottish city hosts the headquarters of a number of large asset managers and banks, including Standard Life Investments.
A previous report by the director of corporate governance stressed that salaries paid out under the fund’s preferred model would not necessarily be higher, but rather they would allow the SPV’s board to consider industry salary benchmarks when agreeing compensation.
Lothian’s external managers include Baillie Gifford and Invesco, responsible for its Pacific equity portfolio; UBS Asset Management and Mondrian Investment Partners as emerging market managers; Cantillon, Lazard Asset Management, Harris and Nordea as global equity managers; and AG Bisset as currency hedge provider.
Additionally, Standard Life manages part of its property, while Rogge manages its corporate bond portfolio.