UK pension group makes $2.6bn foray into PE

LGPS Central, which manages assets of nine UK pensions, joins Northern Pool and Local Pensions Partnership in setting up a dedicated private equity fund.

Local Government Pension Scheme Central, which manages about £40 billion ($52 billion; €46 billion) of assets for nine pensions based in the UK’s Midlands, has established its debut private equity fund as part of its near-term plan to deploy more than £2 billion in private equity.

LGPS Central held a final close on LGPS Central Limited 2018/19 Vintage Private Equity Fund on 31 January, after “six months of comprehensive work to find the right legal structure, obtain regulatory approval and source and implement the necessary finance, IT and operations infrastructure”, according to a statement.

It is not clear how much capital was raised for the fund and LGPS declined to comment on financial terms.

Five of LGPS’s nine partner funds contributed to the vehicle: Cheshire Pension Fund, Leicestershire County Council Pension Fund, Nottinghamshire County Council, Staffordshire Pension Fund and West Midlands Pension Fund. Capital commitments of each pension were not disclosed. No non-party funds participated in this vintage, a spokesman for LGPS said.

Capital raised for the fund will be deployed across fund commitments and direct investments globally, although it is unclear in which sectors or strategies.  Reducing high external costs associated with the asset class was a key reason for setting up the fund, LGPS Central said in a statement.

The vehicle was structured via a traditional private equity model with bespoke provisions for the pensions, Alex Amos, a partner at law firm Macfarlanes, which advised on the fund told Private Equity International.

Amos declined to provide further details on the fund’s fee structure.

LGPS plans to launch successor funds annually as part of its private equity platform, although the target size of these vehicles is not clear. The fund will be managed by an in-house investment team of four, headed by investment director for private equity Omar Ghafur, the spokesman said.

The asset management company is the third of the eight UK pension pools to launch dedicated private equity funds, following the consolidation of the UK public pension system in 2015.

Northern Pool, which manages £44.5 billion in pension assets of West Yorkshire, Greater Manchester and Merseyside, established its inaugural fund, NPEP, in August. It will make total commitments of £480 million to private equity funds in 2018-19, according to a statement. Local Pensions Partnership, which manages £13 billion of assets for the Local Pension Fund Authority, Lancashire County Council and Berkshire pensions, set up a £1.8 billion fund in September 2017 that will invest in buyout, growth, venture and distressed, it wrote on its website.

“Local pension funds aggregating their capital to invest together, to hopefully benefit from preferential terms versus if they invested separately, is a good initiative. Greater firepower gives investors greater terms and economics. In that sense this development is a healthy one,” Amos said.

LGPS Central also appointed former chief executive officer of Pensions Infrastructure Platform Mike Weston as its new chief executive. Weston replaces John Burns and will start his new role on 7 March pending regulatory approval. Weston was previously chief investment officer of the Daily Mail and General Trust pension funds and a director at Hermes Investment Management.