LPP pools £1.3bn credit assets for London and Lancashire schemes

The Local Pensions Partnership (LPP) has launched a £1.3bn (€1.5bn) credit fund, the fourth such asset-pooling vehicle it has set up in the past 12 months.

LPP – the collaboration between the London Pensions Fund Authority and Lancashire County Pension Fund – announced the launch this morning. The fund will pool the credit assets of the two founding pension schemes.

The credit fund is a limited partnership structure and will be managed by LPP Investments, LPP’s in-house asset manager. In a statement, LPP said the fund would have a “long-term, buy-and-hold investment approach with a focus on reduced volatility and capital preservation”.

Susan Martin, LPP’s chief executive, said the fund was “another example of how collaboration can benefit our shareholder funds by delivering not only sustainable long-term investment outcomes, but also cost savings through manager consolidation and an enhanced internal investment capability”.

The launch of the credit fund – officially called LPPI Credit Investments LP – follows similar launches by LPP of private equity, infrastructure and global listed equity vehicles, all within the last 12 months.

LPP said it planned to launch fixed income and total return funds in the near future.

The partnership has £12.8bn of assets under management from its two founder pension funds. A third local authority fund, the £2bn Royal County of Berkshire Pension Fund, has provisionally agreed to join LPP but has yet to invest significantly in the pooled funds launched so far.

In a draft version of Berkshire’s annual report for 2016-17, the fund said it would be “uneconomic” to pool asset classes such as private equity and infrastructure due to transfer costs and “the inequality created by sharing future returns”. It said it would consider future investment opportunities as they become available.

“[The pension fund has judged that initially liquid assets will achieve the most instant benefits from pooling,” Berkshire said. However, its only liquid assets were developed market, emerging market and frontier market equities, as of the end of March 2017.