On the go: Local authority funds are coming under increasing pressure from the government to switch their active holdings to passive investments.
The revelation by Jeff Houston, secretary to the advisory board of the Local Government Pension Scheme, first reported in the Financial Times, comes after Kent Council Pension Fund found itself in the spotlight over its ill-fated investment in the actively managed Woodford Equity Income Fund.
After the Woodford fund saw a huge drop in its value, Kent’s attempt to redeem its £263m investment – making up 5 per cent of its assets – then triggered the blocking of all withdrawals from the Woodford offering.
Mr Houston told an audience at last’s week’s Pensions Expert LGPS Forum that government officials had encouraged the scheme to move out of active funds on the back of the Woodford affair.
But he added this was not the first intervention from officials over the scheme’s investment strategy. “There are elements within government that want the LGPS to be passive and are trying to find a way for that to happen,” said Mr Houston.
“There is a belief we are forgoing savings by not going passive. Things like Woodford come along and you get that knee-jerk regulatory reaction... the easiest thing is to just stop them having that ability to invest in actives.”
Mr Houston told the FT that a 2013 analysis by consultants Hymans Robertson, which suggested LGPS could save up to £230m a year in investment fees and £190m in transaction costs by moving all listed assets to passive management, was often used by the government to press the case for a switch to passives.
