The £3.3bn Oxfordshire Pension Fund, part of the Brunel Pension Partnership Pool, has taken stock of the cost benefits of pooling, concluding that it has achieved significant cost savings for some asset classes.
At Oxfordshire’s latest Local Pension Board Meeting earlier this month, Lorna Baxter, executive director of resources and Section 151 officer, presented the findings. Baxter noted that comparing management fees pre- and post-pooling for some asset classes was challenging. The report exclusively focused on management fees and did not account for additional portfolio costs such as transaction fees.
Despite these challenges, Baxter highlighted “significant” cost savings in passive equities holdings. Management fees for UK equities were reduced to 0.5 bps from 4.5 bps pre-pooling, and fees for the global equity portfolio decreased to 0.75 bps from 13 bps pre-pooling. Although fees have slightly increased due to Oxfordshire’s decision to move its global equities to a Paris-Aligned Benchmark fund, they remain well below the 13 bps paid pre-pooling, now standing at 3.5 bps.
Baxter acknowledged that cost-benefit analysis for active equity holdings was more complex, with only marginal improvements noted. For instance, the fund’s two active UK equity mandates had pre-pooling fees 2 bps higher than those under Brunel’s pooled mandate. However, it was challenging to draw meaningful conclusions for global active equity mandates.
The comparison was clearer for fixed income assets, where Baxter concluded that the pool had delivered “considerable cost savings,” particularly for Sterling-denominated corporate bonds and index-linked gilts (Linkers).
Baxter also emphasised that the pool could offer significantly lower fees for property funds due to its economies of scale.
This assessment comes as Local Government Minister Simon Hoare has requested all administering authorities to update him on efficiencies in the management, governance, and administration of their assets. The government has previously indicated a goal for all listed LGPS assets to be pooled by March 2025.
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