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Welsh pension funds to merge holdings

25 September 2015

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Eight local government pension schemes (LGPS) in Wales are to procure a joint passive equity manager.

The Society of Welsh Treasurers (SWT) pensions sub group is organising the procurement.

The news follows the recent government announcement that the 89 LGPS' in England and Wales would have pool assets.

The LGPS has come under increasing pressure from the central government over a fragmented system, where the 89 schemes, with more than GBP 193bn in assets, use a variety of mandates and managers to invest in similar classes.

It also comes hot on the heels of other collaborative ventures by local government pension schemes in the midlands to combine passive equity mandates (PFI, 4 September).

According to the Swansea Pension Scheme, trustees at the group of Welsh funds are set to approve plans this week.

Once this has happened, the eight funds with more than GBP 10bn in assets, hope to have a new manager in place by April 2016 and procurement will start by the end of November.

The eight schemes have GBP 3bn in passive equity and bond holdings, across three managers and 18 mandates, according to a briefing from the SWT.

A third party will run the procurement exercise and split the cost of doing so accordingly.

Any provider would be appointed to accommodate geographical investment requirements of pension schemes, which each scheme retains autonomy and ownership of assets.

Welsh pension funds have been in the spotlight for a different reason this week, with Friends of the Earth Cymru (FOE) accusing them of making "morally indefensible" investments on behalf of Assembly Members.

Research from the environmentalist group says pensions are tied up in tobacco, gambling and fossil fuel firms to the tune of at least GBP 800,000.

Director of Friends of the Earth Cymru Gareth Clubb said: "I'm sure most Assembly Members will be horrified that their pension funds, the vast majority of which comes from Welsh taxpayers – are invested in some of the most morally indefensible companies on the planet.

"It's thoroughly hypocritical given that the National Assembly has legislated to put the interests of future generations at the front and centre of Welsh public life."

First published 25.09.2015

Lindsay.sharman@wilmingtonplc.com