FX EXECUTION

Having seen costs of over 16 basis points for FX Execution transactions the creation of 8 British Wealth funds will be a viable solution for UK Local Authorities regarding FX Execution. The pension schemes save costs, stay independent of each other and can benefit even further by being together on the FX programme.

MINISTERIAL FOREWORD

At the summer Budget 2015, the Chancellor announced our intention to invite administering authorities to bring forward proposals for pooling Local Government Pension Scheme investments, to deliver significantly reduced costs while maintaining overall investment performance. We have been clear for some time that the existing arrangements for investment by the Local Government Pension Scheme are in need of reform, and the announcement made plain our expectation that authorities would be ambitious when developing their proposals. The publication of these criteria and their supporting guidance marks a significant milestone on the road to reform, placing authorities in a strong position to take the initiative and drive efficiencies in the Scheme, and ultimately deliver savings for local taxpayers.

IMPROVING THE TRANSPARENCY OF COSTS

In addition to the fees paid to asset managers, there are considerable hidden costs of investment that are difficult to identify and so often go unreported by investors. In the case of the Local Government Pension Scheme, Hymans Robertson showed that investment costs in 2012-13 were at least £790m a year, in contrast to the £409m reported by the authorities. Even the £790m understated the total investment costs as it excluded performance fees on alternative assets such as private equity and hedge funds.

As set out above, there is a clear opportunity for authorities to collaborate to deliver hundreds of millions in savings in the medium term. Although there is no overall savings target for the Scheme, the Government expects authorities to take full advantage of the benefits of pooling to reduce costs while maintaining performance.

Source: Department for Communities and Local Government