Sixty Second Summary
Structural Efficiency and the LGPS
06 Dec 2019 - Estimated reading time: 1 minute
- A well-diversified equity structure is key to achieving a Fund’s beliefs and objectives.
- While equities are expected to deliver superior long-term returns, these returns are volatile, and therefore it's important to diversify by region and investment style.
- Committees who wish to explore investment in sustainable equity strategies should be clear on how the strategy aligns with their beliefs and investment objectives and if this can be part of an integrated approach to responsible investment.
A closer review of your investment priorities
With the valuation year for the LGPS in England and Wales now in its latter stages, it's important that Committees continue to consider how their investment arrangements can best achieve their objectives. We've set out a framework for robust governance (see diagram below) which highlights key areas to focus on, as a visual to guide you towards achieving and maintaining success.
In previous 60 Second Summaries, we first identified clear investment objectives and well-defined beliefs as core elements of the framework and the key point of departure from which to assess investment risk and to plan your investment arrangements. We've since discussed strategic focus and cash flow management as further areas of importance for long- and short-term sustainability. This emphasises the need to balance the level of contributions with the investment risk needed to generate required returns, and the importance of understanding your cash flow profile and ongoing obligations in its context.
In this 60 Second Summary, we highlight structural efficiency, as it fits within the robust governance framework. Given LGPS Funds tend to have large or majority allocation in equities, we discuss the strategic role equities play in achieving Scheme objectives and some factors to contemplate when designing your Fund’s equity portfolio.
Download our full summary here.
If you have any questions about anything covered in the summary please don’t hesitate to get in touch.