Wales’ eight public pensions have handed BlackRock a passive mandate worth nearly £3 billion ($4.3 billion) as part of a move to pool their assets.
The mandate makes up roughly a quarter of the £11 billion managed across the Welsh funds.
“We were impressed by the breadth, depth, and quality of the bids submitted.”BlackRock already manages the majority of passive assets across the portfolios. However, Legal & General Investment Management stands to lose mandates from the Rhondda Cynon Taf and Swansea pensions, while State Street will hand over management of UK and US equities for Cardiff’s pension, according to allocation data from the funds’ most recent annual reports.
“We were impressed by the breadth, depth, and quality of the bids submitted, as well as the attention paid by bidders to proposing solutions to meet the specific circumstances of the Welsh funds,” a spokesperson for the pensions said in the statement. “Our search was open to any potential provider who wished to submit a proposal and we believe that this helped to support an extremely competitive process, which was also reflected in terms of pricing.”
Dave Lyons, head of public sector investment consultancy at Aon Hewitt, who advised on the transaction, said the Welsh funds “were able to achieve considerable cost savings… which will compound up over the long term to deliver many millions of pounds of additional value to them.” The funds have not disclosed how much they expect to save through the arrangement.
Public pensions in England and Wales have until July 15 to submit their proposals to government to pool assets and improve efficiencies in their portfolios. UK Chancellor George Osborne wants the pools—which he has controversially dubbed “British Wealth Funds”—to reach upwards of £25 billion in size.
It is unclear whether proposals such as the Welsh funds’ tie-up and the partnership between the London Pension Funds Authority and Lancashire County Pension Fund (approximately £10 billion) will be deemed big enough to fit Osborne’s criteria.
Related: £3B in Passive Mandates Up for Grabs as Wales Joins Pooling Push & Investment Costs ‘Halved’ by Pooling, Public Funds Claim