Two UK local authorities are developing a "groundbreaking" asset and liability management partnership, which will pool £10 billion of assets to cut costs and improve performance.
Lancashire County Pension Fund and the London Pensions Fund Authority (LPFA) want to increase their might, partly to compete for illiquid investments against sovereign wealth funds.
The two funds say they are in the first stage of the partnership. The aim is to create a commonly managed, jointly invested pool of assets overseen by a UK regulated entity created by the two pension funds.
The funds say this will provide the benefits of investment scale and ensure that industry-leading standards of governance will be achieved and maintained.
Each pension fund will retain its separate identity and local accountability. The partnership could also ultimately cover all areas of activity involved in the running of the pension funds, including pension administration.
Edi Truell, Chairman of the London Pensions Fund Authority, said: "We are delighted to be working on the development of this partnership and believe, with a greater pool of assets, both pension funds will gain access to a wider range of investments. It is especially important to compete for desirable illiquid investments against the enormous international sovereign wealth funds and pension investors.
"We firmly believe that large scale asset and liability management partnerships are the best way to deal with the challenges faced by UK pension funds."
The partnership will put into practice the views expressed by both pension funds in their responses to central government on the reform of the Local Government Pension Scheme, the pension schemes say in a statement.
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