Pooling assets has enabled a group of local authority pension schemes to invest in “world-renowned” private equity funds that would normally be difficult to access.
LGPS Central, which includes the West Midlands Pension Fund and eight other UK schemes, has invested in funds that were oversubscribed or run by blue chip managers.
The group is one of eight Local Government Pension Schemes that has pooled assets since laws allowed them to. The LGPS Central members have £45 billion collectively, £20 billion of which is pooled with LGPS Central.
Jaswant Sidhu, private equity portfolio manager at LGPS Central, said: “One of the main benefits of pooling is increased economies of scale, which has helped many of our individual partner funds.
“Investors have also been exposed to blue chip managers and funds which were oversubscribed and not easily accessible to new entrants. Furthermore, with LGPS Central Limited being the in-house manager, our investors will save millions of pounds in management and performance fees that would have been incurred had they invested with, say, a fund of funds type of manager, thus generating higher expected returns over a shorter duration.”
LGPS Central launched its inaugural private equity fund eight months ago and says funding of the first of two fund investment sleeves – which invests in primary funds globally with upper quartile, “established and world-renowned” managers – is completed.
The fund is called LGPS Central Limited 2018/19 Vintage Private Equity Fund and the second sleeve will invest in direct, private equity co-investments.
The LGPS Central pool has nine schemes. Four are not invested in the fund but the other four that do invest in it along with West Midlands are the Cheshire Pension Fund, Leicestershire Pension Fund, Nottinghamshire Pension Fund and Staffordshire Pension Fund.
Jason Fletcher, chief investment officer at the pool, said: “Although we have deployed capital quickly, it’s also important to note that we carried out rigorous due diligence within a robust investment process to ensure we are making good investment decisions.”
LGPS Central already has a co-investment private equity partnership strategy launched in 2018 and said this was performing ahead of targets and has so far executed four investments using 70% of its capital.
©2019 funds europe
