Lothian, Falkirk consider deepening investment collaboration
The £5.4bn (€6.8bn) Edinburgh-based fund, which recently spun out its in-house investment team into the LFPI, an entity regulated by the Financial Conduct Authority (FCA), said it was debating whether to revise the structure of the LPFI to “provide shared investment services” to Falkirk.
The reference to shared investment services was contained within the LPFI’s annual report, presented to Lothian’s pensions committee at its most recent meeting in September, but it did not contain any further details about which services could be shared.
A spokeswoman for Lothian declined to comment when asked to identify asset classes where the funds would collaborate.
However, a spokesman for Falkirk County Council shed some light on the discussions underway and praised the partnership’s “significant achievements” to date, which include the joint infrastructure investments and joint procurement exercises.
The Falkirk spokesman added: “We are working on a range of enhancements to this arrangement, with the most recent including potentially using the in-house expertise of the Lothian team to look at an equity mandate.”
The spokesman added that the approach was being viewed as a “potential model and way forward for better collaborative work” across Scotland’s local authority pension schemes.
Scottish local authority funds, unlike their counterparts in England and Wales, have not been required to pool investments, a reform that has seen the launch of eight asset pools of up to £40bn south of the border, all of which agree they should not compete with each other over infrastructure assets.
The £1.8bn Falkirk and Lothian, nevertheless, last year launched a joint infrastructure mandate by seconding a member of Lothian’s investment team to Falkirk to help identify investments to which both funds could commit.
According to Lothian’s most recent annual report, the funds share the staffing costs and have so far completed five investments, with Falkirk committing £60m to joint mandate.
For its part, Lothian has a nearly 8% exposure to infrastructure, amounting to £414m across listed and unlisted infrastructure, and a further 2.3% exposure to timber assets – all three of which are managed internally.
The alternatives space was highlighted as a growth area by Lothian when it launched the FCA-regulated entity, a vehicle that will allow it to “collaborate more effectively” with other local authority and private sector pension funds.