What could collaboration between Scotland's $93bn pension funds look like?
Scotland’s Local Government Pension Scheme funds are trying to put together a framework for local investment and collaboration - in the hope doing so voluntarily will avoid the government intervention seen in England and Wales (Bob Dechiara/Imagn via Reuters)
We live in a world where anything and everything is being optimised and made fit for the future – including pension funds.
But what looks like improvement for some may strike others as unnecessary meddling. The latest reminder of this is a voluntary vision statement published by the $1.4bn Dumfries & Galloway Council Superannuation Fund.
In an effort to demonstrate that collaboration between pension funds can work organically, all 11 Scottish administering authorities - which collectively manage about $93bn - have said they aspire to allocate 5 per cent of their assets to Scottish investments over the next five to 10 years.
It also alludes to collaboration in areas such as procurement, manager fee negotiation and “shared expertise”.
The vision document goes on to say: “Investment and operational collaboration may involve all or some funds, offering a range of risk/return profiles and asset classes that align with each fund’s strategic priorities.”
Scotland's Local Government Pension Scheme funds to avoid the large-scale ‘Fit for the Future’ reforms which were imposed on their English and Welsh counterparts by the British government.
The Dumfries & Galloway statement is one of the first glimpses we have received of what that might look like.
These will be supported by interim milestones, with recognition that progress will differ across pension funds. The documents add: “Existing investments will be included in the allocation where they meet the agreed definition of Scottish in nature.”
In a separate sub-committee report, the pension fund stressed that this is just a vision at this stage, with committee members not yet being asked to make a decision regarding whether the Dumfries and Galloway pension fund should participate in this collaboration.
Currently, collaboration activity is being taken forward through existing liaison and investment governance groups, which meet quarterly (and in an organic fashion, presumably).
There is also no official timetable for implementing this.
Members of the D&G sub-committee will be regularly updated on the work’s progress “and will be asked to make a decision on whether or not they wish to participate in this collaboration when the proposals have been finalised”.