David Walker, chief investment officer at Hymans Robertson, is the guest on this episode of The Professional Investment Podcast. He chose the story LGPS Central is expanding its co-investment strategy as his news story of the week.
The government’s Fit for the Future reforms has created huge change for the LGPS. With two pools disbanded, other pools are expanding their partner funds. These organisations also must start providing strategic investment advice – in other words, replacing the partner funds investment consultants.
The number of partner funds being added is significant. Border to Coast Pensions Partnership will go from 11 to 18, Local Pensions Partnership from three to nine and LGPS Central from eight to 15. David explains this creates significant operational challenges without also becoming investment advisors.
As result, it’s not surprising that some pools might lose focus on expanding their investment allocations as they deal with those challenges. There will be the significant operational burden of dealing with long tails of legacy assets as those partner funds are absorbed into new pools.
But over the long term there is an opportunity for pools to both increase their asset universe as well as adding more granular detail within each asset class. For example, moving away from just passive equities to active strategies.
We also discussed the challenges larger pools face in meeting the government’s desire for greater local investment given they now have more assets and are spread over larger parts of the country. David said it’s not yet clear how each pool will handle this challenge.
Despite the government’s ambition for pools to carry out more investment themselves, this expansion adds up to considerable opportunity for asset managers to forge new long-term relationships with LGPS pools.
At the end of the podcast, David and I discuss the need for greater investment diversification as well as the considerable opportunities in the UK institutional market.
Watch or listen now
