Public Pensions Pool £6.5B in Passive, Smart Beta Mandates

Seven UK public pensions have appointed Legal & General Investment Management (LGIM) to run £6.5 billion ($9.8 billion) in passive and smart beta mandates collectively.

“Joining forces has enabled us to unlock significant savings and gives clear and tangible evidence of what can be achieved.”The pensions for the counties of Cheshire, Leicestershire, Nottinghamshire, Shropshire, Staffordshire, Warwickshire, and Worcestershire have agreed to pool resources in line with wider plans set out by the UK government to run public pensions more efficiently.

A statement issued by consultant Bfinance, which advised on the agreement, claimed the collaboration would create fee savings of more than 50%. LGIM will manage passive equity, passive fixed income, and smart beta pooled funds for UK and global assets.

“Joining forces… has enabled us to unlock significant savings and gives clear and tangible evidence of what can be achieved if local government pension scheme funds are willing to work together and collaborate as equals,” said a spokesperson for the seven pensions.

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LGIM already runs roughly £3.9 billion in passive mandates for some of the pensions involved in the deal, the fund manager said in a statement. In total, the seven funds have more than £20 billion in assets.

This is the latest pooled project to be announced, following plans by Welsh pensions to combine their passive investments. LGIM currently manages such mandates for several public funds in Wales.

The London CIV—the collaborative venture backed by all 33 public pensions in the UK capital city—also this month announced its first funds.

Those deals come after the government set out its plans last week to dial back investment rules for local government funds, allowing them more flexibility to allocate and collaborate.

It also proposed “backstop” rules for pensions that did not participate in collaborative projects, which could include the Department for Communities and Local Government stepping in to take over responsibility for investment decisions.

Bill Gates, leader, Breakthrough Energy CoalitionRay Dalio, George Soros, Mark Zuckerberg, Jeff Bezos, and 23 other ultra-wealthy individuals have joined the University of California (UC) in a clean energy investment coalition, according to the UC.

Bill Gates—Microsoft founder and famed philanthropist—led the group’s formation and is expected announce it in Paris at the opening of COP21, the United Nations Climate Change Conference.

UC is the sole institutional asset owner involved in the Breakthrough Energy Coalition. The nearly-$100 billion organization has committed $1 billion for “early stage and scale-up” clean energy investments over the next five years, UC said, plus $250 million for relevant ideas out of the university system.

Gates called California’s post-secondary network—“with its world leading campuses and labs”—an ideal partner for the group’s “ambitious” goals.

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“I hope even more governments and investors will join us.”

UC “produces the kinds of groundbreaking technologies that will help define a global energy future that is cheaper, more reliable, and does not contribute to climate change,” the Microsoft founder said in a release ahead of the Paris announcement.

This energy group is the second recent initiative between UC and Ratan Tata, coalition member and ex-chair of Indian conglomerate Tata Group. Last week, the “business legend” signed on to advise UC on international policy, including Asian and subcontinental investment opportunities.

The private sector will ultimately develop the breakthroughs needed for a zero-carbon energy future, Gates said, but the private sector alone cannot alone bankroll foundational research and development. That is where the coalition aims to come in. “I hope even more governments and investors will join us,” he concluded.

Founding Members: Breakthrough Energy Coalition

Mukesh Ambani, Chairman and Managing Director, Reliance Industries
John Arnold, Co-chair, Laura and John Arnold Foundation
Marc Benioff, Founder, Chairman and CEO, Salesforce.com
Jeff Bezos, Founder and CEO, Amazon
Prince Alwaleed bin Talal, Board Chairman, Alwaleed Philanthropies
Richard Branson, Founder, Virgin Group United Kingdom
Ray Dalio, Founder, Bridgewater Associates
Aliko Dangote, Founder and Chief Executive, Dangote Group
John Doerr, General Partner, Kleiner Perkins Caufield & Byers
Bill Gates, Co-chair, Bill & Melinda Gates Foundation
Reid Hoffman, Founder, LinkedIn
Chris Hohn, Founder, Children’s Investment Fund
Vinod Khosla, Founder, Khosla Ventures
Jack Ma, Executive Chairman, Alibaba Group
Patrice Motsepe, Founder and Executive Chairman, African Rainbow Minerals
Xavier Niel, Founder, Iliad Group France
Hasso Plattner, Co-founder and Chairman, SAP Germany
Julian Robertson, Founder and Chairman, Tiger Management
Neil Shen, Founding Managing Partner, Sequoia Capital China
Nat Simons & Laura Baxter-Simons, Co-founders, Prelude Ventures
Masayoshi Son, Founder, Chairman and CEO, SoftBank Group
George Soros, Chairman, Soros Fund Management
Tom Steyer, President, NextGen Climate
Ratan Tata, Chairman Emeritus, Tata Sons
Meg Whitman, CEO, Hewlett Packard
Zhang Xin & Pan Shiyi, CEO, SOHO; chairman, SOHO
Mark Zuckerberg & Priscilla Chan, CEO Facebook; CEO, the Primary School
University of California, Office of the Chief Investment Officer

A separate project to reduce the carbon output of investment portfolios—the Portfolio Decarbonization Coalition (PDC)—is also set to announce new members at the COP21 conference in Paris this week.

Last week the PDC announced it had swelled its members to include Hermes Investment Management, Dutch asset manager MN Services, BNP Paribas Investment Partners, and French investors Humanis and Caisse des Dépôts. The coalition now covers more than $230 billion in assets under management, more than double its initial $100 billion target.

“We know enough about climate risk to know that, as a pension fund, it is our responsibility to act,” said Mats Andersson, CEO of Sweden’s AP4 and a co-founder of the PDC. “We have experience. We have scalable solutions. We now need to make what we are doing today, mainstream tomorrow. And the PDC reaching its target is clearly a sign that we are headed in that direction.”

Saker Nusseibeh, CEO of Hermes Investment Management, added that it was “crucial… that we create the right outcomes from our investment decisions—and the right outcomes on a 30-year time horizon are those that mitigate risk, including carbon risk.”