- Pooling can deliver real benefits of scale to the LGPS – including better long-term performance after fees, improved control over investments, an enhanced approach to responsible investment, and reduced costs.
- Research highlights that optimising governance, professional management, and aligning long-term strategic planning with investment implementation, are seen as key factors for long-term success.
Chris Rule, LPPI's CEO commented on the findings:
“The report confirms there are clear benefits from asset pooling, in particular the positive impact on long-term performance and cost-savings.
"From an LPPI perspective, the research provides a useful analysis of the journeys other pools in more mature markets have travelled, and we are in a privileged position to learn from their positive and challenging experiences, which in turn helps us make educated and informed decisions about the practices and strategies that will work best for our client needs.
"A common theme across all markets is that scale can provide greater choice and access to a range of assets - private markets in particular - a strategy that aligns well with our partnerships with GLIL Infrastructure and The London Fund. As we collaborate more with UK and international investment pools, sharing our knowledge and experiences, the report will help focus and inform future discussions.”
New research on pooling in major international markets shows that pooling in the UK can drive still more value for the Local Government Pension Scheme (LGPS) in the future. It also confirms that scale benefits in international markets have already been demonstrated as “meaningful” and “realisable”, leading to improved performance after fees, better control over investments, and reduced costs.
The independent research, commissioned by seven UK LGPS pools, covered eleven comparable investors in seven major international markets where the pooling process is at a more mature stage. The research sought to understand the issues and challenges these pools experienced in their evolution. As a result, it enables each individual UK pool – and its partner funds – to use the insights gained to support their own future development.
While recognising there is no ‘best way’ to pool, only different ways, the research nonetheless identified three characteristics of success:
Establishing clear divisions of responsibilities, and simplified, flexible decision-making (including effective delegations to specialists trusted to exercise sound judgement over the long term).
Using the opportunity provided by pooling to bring professional teams together in a sustainable way, so that training, development and succession planning can be developed.
Long-term strategic planning and implementation
Developing agreed long-term strategic asset allocations, reviewed annually or less frequently.
The report also highlighted that the clarity of central government objectives and of the pooling framework can both impact the pace at which pooling delivers value.
Read the full research report