Infrastructure, pooling and property problems for Local Government pension funds
There has been a lot written recently on the way the UK government has forced Local Government pension funds into pooled vehicles so that they can draw on their cash to fund infrastructure in a way that could not be done with individual funds. One thing though that they have had to concede is that not all properties should be pool managed, and a concession has been made. Long term growth and long term income are what the funds need to match liabilities, and some might say that the pooling, while making it easier for funds to tap into that long term income, could be seen as a political leaning on the funds' trustees to make up a deficit in central government funding - but to borrow from Francis Urquhart in the original "House of Cards" I could not possibly comment.
The UK’s 101 Local Government Pension Schemes (LGPS) – which own more than £230bn of assets between them – are being forced to consolidate into several investment pools – or, as the Chancellor George Osborne has described them, “British wealth funds”. Osborne hopes to fill the country’s infrastructure funding gap, and this requires scale.But the LGPS pooling debate has implications beyond infrastructure. What does it mean for the £13bn in property owned by the schemes? Incumbent real estate multi-managers perhaps have the biggest cause for concern, as one of the most likely outcomes is a move to more direct investment approaches.”