Proposed rise of investment cap in limited partnerships

The government has launched a consultation on whether to allow pension funds to further invest in infrastructure.

Funds are currently limited to investing 15% of their assets in limited partnerships, the vehicle often used for property, private equity and infrastructure projects. According the consultation launched this week the cap could be doubled to 30%, which would result in up to £45bn in LGPS funds being freed for infrastructure spend.

Said communities secretary Eric Pickles: “This is potentially a huge development and investment opportunity we simply cannot afford to ignore that also allows us to maintain long-term value for money for the taxpayer.”

The consultation comes hard on the heels of a report from the Royal Institute of British Architects (RIBA) published last week which suggested that 100,000 to 300,000 houses could be built per year in the UK with pension fund money. A housing fund of £10bn from LGPS could be set up to create a housing revolution, said RIBA’s Future Homes Commission, resulting in job creation and economic growth.

Said Commission chairman Sir John Banham: “We strongly believe that local government can become the leader of new development once again, by using their assets and powers to create the type of mature, sustainable, mixed tenure communities that Britain needs and that institutional and international investors want to invest in.”

A recent report from The Smith Institute, Centre for Local Economic Strategies, PIRC, and the Local Authority Pension Fund Forum suggested the creation of a clearing house to gather information about potential infrastructure and housing investments for pension funds.

“There is a responsibility that these funds are used appropriately and that return is achieved and risk is at an acceptable minimum,” said Neil McInroy, chief executive of the Centre for Local Economic Strategies.
“Just because many local projects are starved of investment and the funds are there and it seems like a good idea, does not mean we can take risks. The financial future for many people and families rests on these funds. However, we can do more, and to do this, we need some careful deliberation and clarity as to what is possible.”

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07 February 2013
2nd LAPF Strategic Investment Forum (The Landmark Hotel, London)
Strategic investment thinking for senior LGPS investment officers, their independent advisers and heads of LGPS investment committees. Jointly organised by AIConferences and LAPF Investments Magazine
Free places offered on a first-come-first-served basis to qualifying delegates