LGPS pension funds have been investing in their own destruction by giving their money over to fund managers investing in companies running PFI projects. Hendersons Global Investors invested a substantial sum in John Laing a construction company and PFI contractor.
http://www.ipe.com/news/henderson-faces-lawsuit-from-30-pension-funds_36781.php?s=Henderson
John Laing's infrastructure projects included contracts to build and maintain schools and hospitals. They have also had to bear the cost of John Laing bidding for contracts, a cost and risk they say had not been alerted to at the outset. The fund lost money as the cost of debt rose after the credit crunch and John Laing was forced to inject money into its final salary pension fund to plug a spiralling deficit.
A dispute between a group of 30 UK pension funds and Henderson Global Investors over the management of two of its PFI funds has shifted up a gear as some of the biggest names in the UK pensions industry were named as being party to the case. The roll call of public sector funds investors participating in the legal action includes City of Edinburgh (Lothian pension scheme), South Tyneside and Kent along with the BBC and Railpen. Once again clear evidence that public sector workers own money and the LGPS in particular is being used to privatise public sector jobs.
They are seeking substantial compensation for losses incurred by an PFI infrastructure fund, which they claim was promoted as a low risk investment.
The dispute, first reported in The Times newspaper, concerns the Henderson PFI Secondary Fund II, which raised £575m from investors in 2005, but which has since fallen in value by 60 per cent to £225m (€269m).
Sources close to the dispute say the pension funds blame Henderson's purchase of construction company, John Laing, (at a cost of £1bn in a bidding war in order to gain exposure to the firm's 60 to 70 PFI projects), for the fund's poor performance.
The disgruntled funds claim that the fund was promoted as a low risk investment, which would provide a steady inflation-proofed income stream for years into the future. Investors also say they were expecting the fund to invest in a range of firms involved with infrastructure projects, not one individual company with a pension fund deficit.
This is what happens when you hand over your money to third party investors without any hope of directly managing your assets we can be pretty sure that no members of the Kent, Edinburgh or South Tyneside LGPS funds were consulted over these investments either.
