A group of senior-level executives from major pension funds across the world have developed a guide to help governments understand how they can successfully attract domestic institutional capital to help achieve their policy goals.
The guide is the output of a working group of the International Centre for Pension Management (ICPM), a global network of more than 50 pension funds and related organisations that together manage more than $8trn (€6.9trn) of assets.
Sebastien Betermier, ICPM executive director and a lead author of the new paper alongside Onno Steenbeek, from APG Asset Management, told IPE: “We launched this working group because there is a real disconnect between what governments expect from private capital and what institutional investors expect from their investments.
“This report develops a comprehensive and practical framework – the ‘investible window’ – that is extremely useful for understanding how domestic institutional capital can align to public goals and priorities.
“Our hope is that this paper will provide clarity and facilitate constructive discussions on what institutional investors consider attractive and credible investment structures.”
Other pension fund executives on the working group, in addition to Betermier and Steenbeek, include Mark Lyon, deputy chief investment officer at Border to Coast Pensions Partnership; Chris Rule and Richard Tomlinson, CEO and CIO of Local Pensions Partnership Investments (LPPI), respectively; Jeffrey Hodgson, managing director, global stakeholder affairs, and Derek Walker, head of portfolio design and construction, at CPP Investments, and Ali Parker, head of investment research and strategy at TCorp in Australia.
‘Structures that money can trust’
The report – Unlocking domestic investment opportunities: Aligning public goals with pension fund realities – describes how governments will not mobilise domestic institutional capital via “patriotic appeals and mandates” but by “creating structures that money can trust”.
It defines the ‘investible window’ as “the specific set of legal, financial and governance conditions that must simultaneously exist for institutional capital to flow into domestic projects while meeting fiduciary duty”.
“While the exact contours of the investible window may vary across institutions […], there is broad consistency in how institutional investors assess investment readiness,” the paper continued.
“Understanding and designing around this investible window is essential for governments and development partners seeking to attract private capital to domestic priorities.”
Last week, the Mercer CFA Institute Global Pension Index report highlighted how calls for pension funds to channel capital into national priorities have intensified, with the issue particularly central in the UK, where debates on investment mandates and economic growth are reshaping pension policy.
This morning, the UK government unveiled ‘Sterling 20’, a new partnership between 20 of the UK’s largest pension funds and insurers that will work with the government and City of London Corporation “to channel the nation’s savings into key infrastructure and fast-growing businesses in key modern industrial strategy sectors like AI and fintech”.
In a recent opinion piece for IPE Magnus Billing, the former CEO of Swedish pension fund Alecta, said policymakers’ productive finance push made sense, but that “[w]hen policymakers push pension funds towards higher-cost alternatives, they’re asking retirees to gamble their financial security on uncertain outcomes”.
Founded in 2004 by Keith Ambachtsheer at the Rotman School of Management, University of Toronto, ICPM is now a network of 54 pension funds, having last week welcomed GIC, Singapore’s sovereign wealth fund, as a new member.
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