A group of eight local government pension funds in Wales hired BlackRock to run about £2.8 billion ($4 billion) in passive assets, covering equities, bonds and alternative index assets.
The eight pension funds have a total of about £11 billion in assets.
BlackRock is replacing the other two incumbent passive managers, State Street Global Advisors and Legal & General Investment Management.
Dave Lyons, head of public sector investment consultancy at Aon Hewitt, which assisted the Welsh funds in its project to identify a single passive manager, said in an e-mail that he believes this is “just the first example of the Welsh funds working effectively together, and that more will follow … in any event, and thinking more generally, most LGPS funds have some passive investments and therefore passive management would seem to be a sensible place to start for any investment pool.”
The hire followed a “comprehensive and robust search” with “considerable interest from potential providers,” an Aon Hewitt news release said. The Welsh pension funds undertook this search to use their collective investment scale to seek a suitable single passive manager and to reduce costs.
The pension funds intend to build on the collaboration “as they progress their investment pooling proposal with ongoing cooperation across Wales expected to bring further benefits,” the news release said.
The eight pension funds are Cardiff & Vale of Glamorgan Pension Fund, Cardiff; City and County of Swansea Pension Fund; Clwyd Pension Fund, Mold; Dyfed Pension Fund, Carmarthen; Greater Gwent Pension Fund, Torfaen; Gwynedd Pension Fund, Caernarfon; Powys County Council Pension Fund; and Rhondda Cynon Taf Pension Fund, Tonypandy.
Last year, the U.K. Chancellor of the Exchequer George Osborne announced his intention to bring together the 89 England and Wales local government pension schemes into around six British wealth funds of at least £25 billion. Final proposals of how pension funds plan to pool their assets are due in July.