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SubscribeFour months after Labour took power, LGPS practitioners across pools and local authorities have largely accepted the need for fund consolidation, but a strong sentiment against government-imposed changes persists.
A clear majority of LGPS practitioners recognise that consolidation at the fund level remains likely, yet over half of survey participants believe fund mergers should remain voluntary, according to the second LGPS Investment Survey conducted by Room151 in collaboration with Schroders.
Presenting the findings at Room151’s annual Investment Forum in London, Paul Myles, head of LGPS at Schroders, stated: “Three of the top four biggest disagreements from the sector were against Mansion House proposals such as full pooling by March 2025, an additional 5% investment in growth private equity and venture capital allocations and mandatory investments in place-based investing.”
While the survey indicated some willingness to adapt, only 7% of respondents believed that funds should merge into a structure comparable to the Canadian Maple 8 model. “Major structural change is more likely to hinder, rather than help realise ambitions for the scheme,” said one survey respondent, adding that it would be better to find ways to enhance existing capabilities and strengths.
Another participant remarked that it was time to “stop the interference from politicians who just want to fund their ambitions.”
The poll was broken down into five key areas, addressing the future of the LGPS, asset allocation and cashflow trends, place-based investing, private markets, and net zero targets. Now in its second year, 95 LGPS practitioners representing funds, independent advisers, and pools took part.
The survey also revealed that investors continue to overhaul their strategic asset allocation. As with last year, investor appetite for private markets continues to grow despite macroeconomic challenges. The asset classes most in demand remain renewable infrastructure, private debt, and private lending, followed by corporate fixed income and natural capital strategies, reflecting sustained interest in cashflow-generating assets. However, compared to last year, demand for renewable infrastructure, core infrastructure, and private debt has declined somewhat. Meanwhile, investor appetite for equities continues to decrease, with more than half of survey respondents indicating plans to reduce their allocations.
The survey further reveals continued interest in making a local impact through place-based investing, with over 60% of participants considering further targeted investments within their fund or pool area. However, more than half of respondents emphasised that the performance of such investments must be competitive against similar global assets.
The survey also showed sustained demand for sustainability and climate strategies, aligning with the new government’s ambition to attract investment in the UK’s energy transition. Investors ranked renewable infrastructure and natural capital as the most suitable strategies to deliver on net zero targets.
Reflecting on the results, Myles emphasised that while there was some willingness to accept reform, the LGPS did not necessarily agree with the Labour Parties’ wider views on how the Scheme should be managed. “Further consolidation is anticipated and accepted, as is the desire to invest more in the UK, but you want this to be on your terms rather than being mandated” Myles summed up the sentiment among the Scheme.
The full survey can be accessed below
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