28/09/2011 Author: Kirstie Brewer

Croydon heads LGPS consultancy scheme

The £630m ($977m) London Borough of Croydon pension fund is pioneering a scheme that will see a number of local government pension schemes (LGPS) share investment consultancy services, a framework that could also be extended to hedge fund selection, as a way of managing costs and saving time.

Croydon, the council behind the new investment consultant selection framework agreement, has selected Aon Hewitt as the scheme’s advisor. Harrow council are also lined up to appoint Aon Hewitt under the agreement, with half a dozen other unnamed London local authorities also in the pipeline, Nigel Cook, head of pensions and treasury at Croydon, told HFMWeek.  

“In working collaboratively, fees and charges are brought down and Aon Hewitt have a ‘tipping point’, whereby a discount is awarded if five or more local authorities come on board under the agreement,” Cook said.

Separate manager selection framework agreements have also generated considerable interest among LGPS, a development which could see hedge funds vying for limited places on pooled ‘buy lists’.  However, individual local authorities will still be able to pursue separate hedge fund searches.   

The framework agreements would streamline the traditional search approach, with one borough sponsoring the framework and carrying out the lengthy search and selection process.

“The managers’ framework agreement is something that all London local authorities will be interested in and they are currently exploring it among themselves,” Ian Bailey, investment principal at Aon Hewitt explained.   

“If less procurements are necessary there are definite savings, and I also think the interest is driven by a desire to be more nimble,” he said. “It will be important for fund managers to put their best foot forward and get on the list because it could prove difficult to win mandates without being on it,” Bailey warned.