The common investment fund that — it is hoped — will consolidate investment of 33 local authority pension funds in London is taking shape, said Hugh Grover, director of fair funding, procurement and performance at London Councils.
London Councils, which represents the authorities, announced July 21 the establishment of a limited liability partnership, in a move that brings the reality of one platform to manage the investments of the local authority pension funds of 32 London boroughs and the City of London one step closer. These funds, which are now managed separately, have more than £24 billion ($40.8 billion) in assets.
A few days later, London Councils started the procurement process for various services to the fund, which is targeting an initial market value of about £5 billion, according to documents. The amount of segregated assets requiring safekeeping, and the amount in pooled funds held at third parties, remains unknown. It is anticipated the London CIV will begin offering investment opportunities to London local government pension funds by the first half of next year.
The first search launched was for an asset servicing provider to cover global custody, fund administration, depository, transfer agency, fund accounting and other services.
Mr. Grover said other searches, for an investment consultant and compliance services, will follow. “We hope to have the key suppliers in place by the end of the year,” he said.
As for the investment process, Mr. Grover said London Councils is analyzing the “mix of current investments across the boroughs, in order that we can start thinking of what the fund will look like for day one.”
He said executives will look at the current mix of money managers and the individual pension funds’ allocations and search for commonality. “We will then talk to the boroughs and fund managers about whether there are benefits to bringing that common mandate into the common investment vehicle, to aggregate in each of those mandates the investments,” said Mr. Grover. That, he said, would lead to the money manager treating the separate pension funds as one client, bringing costs down.
The LLP and the common investment fund itself also need to obtain authorization from the Financial Conduct Authority before it can begin operations.
“Our target at the moment is to have our first assets under management on board before the (U.K. general) election next year,” which takes place May 7, Mr. Grover said. There is no particular reason for choosing that date, beyond the fact that the executives working on the initiative live in a “political world and that is a date we can focus on,” he said
“That is ambitious, and this is a complex project, but if we are not careful the complexity can lead to hours and hours of debate, and not a lot of progress. So a little urgency underneath it was necessary,” he added.
