Border to Coast Pensions Partnership, one of the UK’s largest LGPS pools, has launched its first two sub-funds with £7bn of assets from three partner councils.
Equity investments currently managed in-house at the three member funds have transferred assets to the new Border to Coast Overseas Developed Fund and a UK Listed Equity Fund.
The assets come from Teesside, East Riding and South Yorkshire pension funds.
Nine partner funds of the pool with equity investments managed externally are understood to be awaiting the launch of Border to Coast’s externally managed fund towards the end of the year.
Rachel Elwell, chief executive of Border to Coast, said: “We are all delighted to have achieved this significant milestone, which is testament to the strong partnership that has been built between our partner funds, with the newly formed Border to Coast and with our advisers and service providers.”
Chris Hitchen, chair of Border to Coast, said the board was pleased that the transfer took place without the planned timetable slipping.
The pool said it is also planning to launch an emerging markets equity fund and a further UK equity fund in the fourth quarter. A global equity fund will follow in 2019.
The plans will take assets under management by the pool above £10bn by the end of 2018, as other partner funds come on board.
Border to Coast is also operating advisory mandates for the trio of councils who joined the first launch for assets totalling around £5bn yet to be transferred to the pool.
Mel Worth, chair of the Cumbria Pension Board — one of the funds in the pool — told Room151: “When the pool launches an externally managed UK equity fund, it will be up to us to decide whether to go for that, or the pool’s internally managed fund.
“The internally managed one will be cheaper to manage than an externally managed one, but we will need to consider value at that time.”
Worth expressed satisfaction with pooling progress, saying: “We can’t have 12 separate UK equity funds and there has to be some compromise.
“I suspect all funds will not be completely satisfied but even if they don’t get 100% of what they want, it will be 95%, which is a good result.”
Border to Coast is set to retain core middle and back-office processing, valuations and fund accounting in-house, at least during the start of the transition process, it has emerged.
A report to the audit committee of pool member Central Bedfordshire Council, this week said: “These activities will be retained until the company assesses that the non-listed portfolios and their operational requirements reach ‘critical mass’.
“This decision will be based on portfolio complexity, size, number of investments and the complexity of the operational support required.
“At this stage Border to Coast will look to outsource these supporting services.”
In January, Border to Coast appointed John Harrison to set up the pool’s investment function and oversee the transition of assets into Border to Coast from the 12 partner LGPS funds.
In July, Border to Coast LGPS pool appointed an international asset manager to encourage ethical business practices at investee companies.
