Speaking to Public Finance after the chancellor used the summer Budget to urge the 89 schemes in England and Wales to develop proposals to pool investments, Local Authority Pension Fund Forum chair Kieran Quinn said the industry “accepts the challenge of change”.
He said the Treasury’s call for funds to develop their own plans was “more positive” than indications from the previous coalition government that it may impose reform, including moves to passive asset management.
“In the government’s challenge, the language is different than it has been previously, and therefore there is much more opportunity for us to find solutions,” said Quinn, who is chair of the Greater Manchester Pension Fund as well as the LAPFF, which represents 64 funds.
In particular, he said, funds would seek a loosening of investment regulations to allow collaboration arrangements in the sector to flourish. Examples include GMPF forming a £500m infrastructure fund with the London Pensions Fund Authority.
Making reforms a “genuine two-way process” could free funds across the sector, which have assets totalling £180bn, to invest more in infrastructure, Quinn added.
“The one message I’ve given clearly to those I’ve spoken to is – whatever your view – let’s make sure we respond positively,” he said. “Let’s say to the government that if you are really up for this, if you did x and y, we could do a, b, c, d, and e.”
The LGPS has investments across a mix of asset classes, he highlighted, and this diversity is a strength. “But within that, there is clearly an opportunity for us to match some of those investments with the government’s objectives, especially around infrastructure, but they have to free some of the rules,” he added.
“So I would expect there to be a lot more collaboration between funds to put in a response.”
Local government minister Marcus Jones told PF the government would work with LGPS authorities to ensure they pool investments to significantly reduce costs, while maintaining overall investment performance.
“Later this year we will set out those detailed criteria and publish a consultation on backstop legislation which will ensure that those administering authorities that do not come forward with sufficiently ambitious proposals are required to pool investments.”
Nigel Keogh, CIPFA’s pensions technical manager also told PF that it was welcome that the government was now encouraging collaboration schemes.
“The announcement in the Budget is welcome and allowing LGPS funds to come forward with their own ideas was certainly the direction of travel we hoped the department would follow when we responded to the consultation – building on the good work that has already been done in terms of collaboration initiatives and actively looking to promote those initiatives and remove any regulatory barriers there may be to taking them forward.”
