Wales’ eight public pensions are set to rubber-stamp plans to pool as much as £3 billion ($4.7 billion) in passive mandates.
Documents published by the £1.4 billion City and County of Swansea Pension Fund show that treasurers from the eight funds have agreed in principle to push forward with pooling their pension investments. Discussions had been halted last year due to uncertainty over the direction of UK government policy.
A report, to be put to Swansea’s pension fund committee on September 24, recommends the appointment of one passive investment provider to run the asset pool on behalf of the funds. The timetable set out by the report indicates the procurement process will start in November with a view to having the provider in place by April 2016.
The provider should “meet both current and future needs of all eight funds”, the report stated. This includes accommodating geographical requirements (global and regional splits), currency hedging, and environmental, social, and governance concerns.
Although the collaboration is to involve all eight of Wales’ public pensions, one of them—the £1.2 billion Clwyd Pension Fund—had no passive equity exposure according to its 2013-14 annual report.
BlackRock currently manages more than £1.5 billion across five of the eight pensions. Legal & General runs more than £500 million in two mandates for the Swansea and Rhondda pensions.
Asset allocation data from the pensions’ 2013-14 report suggest that as much as one fifth of the £12 billion of assets in the eight Welsh pensions was invested passively as of March last year. However, the more recent report estimated passive investments—including fixed income—totalled more than £3 billion, or a quarter of Wales’ total public pension assets.
The UK government is expected to set out detailed plans for pooling of public pension investments by the end of November, according to sources close to the discussions. Ministers have already indicated that they would like to see asset pools of £25 billion to £30 billion, although this figure is an early-stage ballpark figure.
Related: London United & UK Government Said to Target £30B Public Asset Pools