LGPS funds in strong support of local investment but journey ahead is peppered with practical challenges

There’s strong support for local investment amongst, heads of fund and officers in England and Wales LGPS, but significant practical challenges dominate, according to research from Hymans Robertson. The firm’s latest annual report on LGPS funds, Local investment in the LGPS: fund perspectives, found that more than a third (35%) of funds have already prepared a local investment strategy to help them meet the government’s fit for the future investment ambitions. However, over half (53%) remain low in confidence that there will be enough local investment opportunities in their authority area and only 8%feel there will be enough in their pool. The report shows 42% of funds are somewhat confident in their own fund’s capacity to implement local investment and quantitative responses to the survey suggest that there are pockets of existing strong relationships between funds and pools that could offer the blueprint for others. Critically, the report, also shows that there is confusion about the definition of ‘local investment which highlights the need for clearer guidance, claims the leading pensions and financial services firm.

The report is based on a survey of 30% of LGPS funds and details the variations in definition of ‘local’ between funds and pools. Almost half (48%) of respondents define local investment as anywhere in the pool’s authority area, nearly a quarter (23%) focus on their own administering authority, and 12% look to UK-wide opportunities.

More than half (58%) expect to allocate 0–5% of assets to local investment, with only 25% targeting 5–10%. Despite there being the option to  allocate zero assets, none of the respondents said they were taking this route. Qualitative responses to the survey also showed it may be that larger LGPS funds have a greater appetite for local investment. in addition, the survey found that Private markets dominate expected asset classes for local investment, with property, infrastructure, and specialist housing leading the way.

Commenting on the report and the journey ahead for funds and pools, Iain Campbell, Head of LGPS Investment, Hymans Robertson, says:

“Our survey shows that the LGPS is ready to embrace local investment, but there is no avoiding that there’s a complex journey ahead. The average expected allocation of 4.6% which is around £18bn shows real intent, but the diversity in definitions and approaches may lead to challenges in pool implementation.

“Collaboration will be key. Nearly half of funds want to work closely with local authorities and pools, but there is variation in successes to date that needs to be reflected on, so all on the journey can achieve parity. So, while there is definitely a lot of work to do to ensure alignment, the good thing is the pending March 2026 deadline should add impetus to conversations that support alignment in this area. The focus between now and then should be on the basics, ensuring that collaboration and learnings are shared. This will help funds to ensure that they can take the opportunities that are right for them and still meet their fiduciary duty requirements.”

A copy of the report can be found here.

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