ACCESS, the United Kingdom’s £35 billion Local Government Pension Scheme (LGPS) pool, is seeking two private equity managers in its latest push into private markets following mandates to infrastructure and real estate managers in the last year.
ACCESS, which outsources all investment management and has mandated to a pool operator to run its outsourced processes, is planning a multi-vintage private equity programme.
The 11 pension funds in the pool, all located in the east of England, will be able to commit to different vintages on an ongoing basis over the terms of the mandate. Each vintage will be globally diversified with investments across primary and secondary funds and co-investments.
Annual commitments to both external managers will average around £500 million in the first five years but the total allocation over time will reach £4-6 billion.
“Considering the potential ultimate scale of the mandate, it is anticipated that total assets across all vintages across both allocators could exceed £4-6 billion, based on potential asset growth and/or increases to individual authorities target allocations,” states the pool.
ACCESS pool, one of eight LGPS pools, is under the radar compared to better-known sister pools like Border to Coast, Brunel Pension Partnership or LGPS Central.
Yet with a potential £56 billion in assets under management if all assets in the 11 pension funds are pooled and representing 3,400 local authority employers, it is one of the largest LGPS partnerships. Pooled assets represent 85 per cent of all listed assets held by the individual pension funds and 59 per cent of total assets have been amalgamated so far.
In comparison, Brunel Pension Partnership now runs around 80 per cent of total member assets.
A government consultation published last year found only £145 billion, or 39 per cent, of total LGPS assets had been transferred from single funds to the pools. If the LGPS was a single fund it would have around £365 billion assets under management.
One of the reasons behind slow progress by some pools is that the government never laid down clear rules around how the pools should be structured. And although assets have been pooled, other functions including administration or governance remain in the hands of the individual pension funds.
For example, at ACCESS strategic oversight and scrutiny responsibilities remain with the individual pension funds as does all decision-making not only on their individual asset allocation, but on the timing of transfers of assets into the pool.
ACCESS’s own, modest, internal team comprise a handful of full-time staff sitting in its support unit providing program and contract management support. Neither its joint committee (the formal decision making body) nor the support unit have FCA authority.
The three pension funds making up Northern LGPS have also been slow to pool – like £18 billion West Yorkshire Pension Fund. Apart from two pool mandates in excess of £10 billion each, West Yorkshire continues to invest the bulk of its assets via its own 20-person in-house team based from its Bradford office.
ACCESS uses Apex Investment Advisory to advise on implementation for the pooling of illiquid assets including private equity, private debt, infrastructure, and real estate. As implementation advisor, Apex provides support in selecting individual investment opportunities and investment managers to build portfolios in a range of illiquid assets.
Infrastructure
Earlier this year ACCESS allocated £1.5 billion to two infrastructure fund vehicles managed by IFM Investors and J.P. Morgan in its second push into private markets in allocations focused on core plus and value add investments spanning transportation, social infrastructure, energy and telecommunications utilities, GDP sensitive assets and contracted power and energy assets.
In November last year ACCESS selected real estate manager CBRE Investment Management to manage both a UK core real estate and a global real estate mandate for its first illiquid asset class.
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