LPP to appoint third-party to assess alternatives strategies

The £12.5bn UK pension scheme has issued a tender notice requesting third-parties to provide due diligence assessments on private credit, private equity and infrastructure investments.

UK-based Local Pensions Partnership (LPP) is seeking a third party to play “devil’s advocate” over proposed alternatives investments.

The LPP is specifically looking for a firm specialising in operational and due diligence assessments of alternative investment strategies. This includes any proposed deployments in private credit, private equity, infrastructure and liquid alternative strategies.

The £12.5 billion ($16.3 billion; €13.8 billion) pension fund issued a notice seeking proposals on the Tenders Electronic Daily, a supplement to the official journal of the European Union on Thursday, 3 August.

“When undertaking security selection, investments undergo thorough internal investment and operational due diligence; LPP is looking to obtain access to independent third party operational and investment due diligence for alternative investments, to provide a devil’s advocate to internal investment recommendations,” the tender document noted.

The value of the contract is £3 million and successful party will secure a 12-month term with the option to renew every year over a 10-year period.

A representative for LPP did not respond to a request for comment before press time.

Established in 2016, the LPP is a partnership between both the London Pensions Fund Authority and the Lancashire County Pension Fund Committee. The LPP is made up of more than 500,000 members from seven local government pension schemes and seven emergency pension schemes.

The LPP is aiming to reduce investment fees by £7.5 million per annum as it aims to take investment strategies in house. Plans are in place for to establish pooled vehicles covering private credit, fixed-income and property investment strategies.

“As part of our strategic business plan, we have significantly increased resources in key functions, including finance, governance, legal, compliance and investment operations,” said Susan Martin, chief executive of LPP, in a statement on the LPP’s Annual Report published on 31 March.

“This has been possible due in part to reduced fees paid to external fund managers, and an increased allocation to internally managed funds,” she added.

In July, the pension scheme launched its global infrastructure fund. Through the fund, the LPP is aiming to directly invest £1.5 billion into infrastructure project, £688 million of its own capital and £812 million of investor commitments.

The LPP also created the LPP Investment structure, a subsidiary to manage direct private equity investments of the combined pension schemes. The structure is accredited by the Financial Conduct Authority and as of April, managed £1.8 billion in assets.