As part of my frontier finance research project, I’ve been doing quite a bit of work on the impediments to pension and sovereign wealth fund collaboration and co-investment. As frequent – and probably even occasional readers – of this blog know, I tend to go on and on about pension fund collaboration, cooperation and co-investment and their potential benefits. Why? Because the economic geographer in me is convinced that like-minded, frontier investors should be sharing networks, resources and even deals. These are funds that currently try to in-source a variety of asset classes, and some are struggling to do so effectively. A community of like-minded investors could surely help in this regard.

But it’s not really happening (yet). And I am beginning to understand more and more why this is the case. The factors constraining peer-to-peer collaboration and co-investing seem to be of five types:

1) Structure: Can you actually set up a formal mechanism for sharing deals that is agreeable to all parties? (e.g., loose or formal; discretionary or non-discretionary.) 2) People: Can you get non-executive staff to coordinate? Can the investors hire the talent they require to be good partners? (e.g., experienced or novice; seconded staff or external hires.) 3) Governance: How do you get buy-in from fund leadership for the requirements? (e.g., public bureaucracy; resources constrained; allergic to innovation.) 4) Institutional: Can an investor find like-minded investors with the same philosophy? (e.g., culture; norms; process, philosophy) 5) Regulation: Are funds going to have to face off against the in-house lawyers? Do their local rules prevent international collaboration? (e.g., fiduciary duty.) So while the benefits of collaboration and co-investment among peers seems clear, the impediments are equally serious. But I remain optimistic. Why? Because now that we know the problems, we can start working on solutions. And that’s what I’ve been doing...