Manager fee restructure lowers costs for LGPS

Majedie Asset Management has decided to treat public sector clients representing £1.4bn of its UK equity fund on per-formance management fee arrangements as one client, and move them to a single annual management fee rate of 35 basis points.

Because [they are] treating all UK public sector clients as if they were one client, we are able to access a lower base fee than we would otherwise

“Because [it is] treating all UK public sector clients as if they were one client, we are able to access a lower base fee than we would otherwise,” said Nicola Webb, pension fund officer at the £801m London Borough of Hammersmith and Fulham Pension Fund, which has around £190m invested in the fund.

A spokesperson for Cardiff and the Vale of Glamorgan Pension Fund, which also invests with the manager in UK equities, confirmed that the scheme had received notification that its fee structure had changed in its favour.

Hermes GPE is also weighing up a similar move for public sector clients of its infrastructure fund, according to someone familiar with the fund.

“There’s been much debate and comment in the press and pensions industry on the merit of merging [local government pension schemes] and really the debate has been whether they can save money and deliver higher returns,” said Rob Harris, chief executive officer at Majedie.

The asset manager felt by treating its public sector clients as one, it would gain the upside of merging and asset pooling, but would also retain the ability to invest with a manager small enough to generate strong investment performance.

Karen Shackleton, managing director at Allenbridge Investment Solutions, said it was inevitable that other managers in the industry will follow.

“It will have definitely been seen as a welcome move by the local authority pension schemes [but] it’s a direct challenge to the proposal for a common investment vehicle and also for a single LGPS,”she said.