From the blog: With the April deadline for the individual local authority schemes in England and Wales to begin the process of pooling just gone, the new entities have their work cut out to establish a common framework and consolidate the assets of the constituent schemes.
Each local authority will already have its own well-established way of classifying and defining its existing assets that will require standardisation and validation to ensure it is accurate and fit for purpose as the assets are pooled.
While this will be the most immediate concern for the management teams of the new pools, it is only one piece of the puzzle.
Each local authority will already have its own well-established way of classifying and defining its existing assets that will require standardisation and validation to ensure it is accurate and fit for purpose as the assets are pooled. At the same time, the granular level of detail required in order to be able to report back to the constituent schemes will need to be maintained.
Putting agile data management at the heart of their operations from the start will help to smooth the transition
While this will be the most immediate concern for the management teams of the new pools, it is only one piece of the puzzle.
One of the central aims of the reform is to reduce investment costs and offer 'excellent value for money’ by achieving greater economies of scale and introducing improved governance and decision-making frameworks. If the new pools are to deliver on this, they must have one eye on the future and build systems and processes that are both robust and agile.
The range of asset classes available to the new schemes will be greater than under the existing schemes. To help with the increase in complexity, they will need to ensure their accounting and data management platforms are not just able to cope with the transfer of existing assets, but are flexible enough to support new and more complex asset types.
Furthermore, the new pools, with their greater financial muscle, may look to make direct investments. At least one pool has already said it plans to increase its exposure to direct property investments. Interest in other alternative asset classes, such as private equity, private debt and infrastructure, are likely to follow as they build out their investment capabilities.
Of course, the pools will also need to make sure they are able to satisfy the reporting demands of both the Financial Conduct Authority and the Department for Communities and Local Government, which are likely to be a formidable undertaking in their own right.
The managers of the new Local Government Pension Scheme pools already have a lot on their plates. Putting agile data management at the heart of their operations from the start will help to smooth the transition and leave them in a better position to deliver the efficiencies and cost-savings expected.
Amit Bharakda is a sales director, EMEA at Eagle Investment Systems
