The Border to Coast Pensions Partnership (BCPP) pool is worth around £36bn, comprising a collection of twelve LGPS funds. Ian Bainbridge, head of pensions at the Tyne and Wear Pension Fund, part of the BCPP pool, explains: “Every pool made a submission to the government in July setting out their proposals for pooling and as part of that submission we took external advice, which included asking Legal & General’s transition team to undertake some analysis, looking at the assets and number of managers and how we could move those assets into the pool.”

The pool has already largely consolidated its passive allocation as much of it was managed by Legal & General Investment Management, while illiquid assets will be allowed a period of run-off. Once the pool is formally established the next stage will be to move £8.5bn of active externally managed equities and £3.5bn of bonds into the pool.

“There is actually very little duplication of managers across our pool,” says Bainbridge. “To take just the global equity mandates, there are currently around 20 managers, which we intend to consolidate to between three and seven managers.”

 Bainbridge is advancing the debate. “I think it is important not to stand still and just await further news from the government on the off-chance we do not get a go-ahead. We did a lot of work on this and believe we are delivering what the government wants and what will benefit the funds.

“We have done some analysis on what the costs and implications of pooling are, and need to evolve and develop this further to see if the implementation does bring down costs effectively. This will involve further work with the transition manager. The key objective for us is to improve performance net of fees, and to be a smarter investor.

“We may have to use a tender process to appoint a transition manager going forward but even if we do that, it has been important to have had discussions with a transition manager to help us with the planning process. They have been very valuable in helping us with our thought processes.”

The pool is currently considering whether to transition the active equity portfolios in phases or at one time. “It could be that we decide to transition our global equity mandates first and to consolidate the regional equity portfolios several months later, just to make sure we have not bitten off more than we can chew,” Bainbridge explains.

A simultaneous transition would confer crossing opportunities but there may be added risk in trying to do too much. “It is more important to get it right rather than to progress with undue haste,” he adds. “There is a risk that the project may get delayed by Brexit as officials in government may have their minds on other things, but we are still expecting feedback in the autumn.”