Asset management and stewardship

Stewardship and responsible investment

Collectively the £342bn LGPS funds are one of the largest 10 global sources of capital and can influence behavioural changes that lead to better stewardship by the global asset management community and the entities and places they invest in.

All LGPS funds have published their Investment Strategy Statement (replacing Statement of Investment Principles) and comply with the Myners Principles as these are LGPS statutory requirements.

There is now a new UK Stewardship Code 2020, however for the period of this report the UK Stewardship Code (second edition 2012) still applied to the signatory funds listed below. The global United Nations Principles of Responsible Investment (UNPRI) set out key principles of effective stewardship for asset owners to help them better to exercise their stewardship responsibilities.

Compliance with these UK and global sets of principles is not mandatory for LGPS funds but they have the support of the UK Government and Local Authority Pension Fund Forum (LAPFF).

Some 32 LGPS funds/pools (36%) were Tier 1 signatories to the Code and 12 funds (13%) (inc five pool companies) were signatories to the UNPRI (see table below). Since March 2020, East Sussex Pension Fund became a signatory to UNPRI.

Signatory to UNPRI


Account Name

Signatory Category

HQ Country

Signature Date

East Sussex Pension Fund Asset Owner United Kingdom 11/12/2020
Hampshire Pension Fund Asset Owner United Kingdom 16/01/2020
Border to Coast Pensions Partnership Limited Asset Owner United Kingdom 31/10/2019
City of London Corporation Asset Owner United Kingdom 12/12/2018
Local Pensions Partnership Asset Owner United Kingdom 20/07/2018
LGPS Central Asset Owner United Kingdom 24/05/2018
London CIV Asset Owner United Kingdom 21/05/2018
Brunel Pension Partnership (BPP) Asset Owner United Kingdom 16/03/2018
Kent County Council Superannuation Fund Asset Owner United Kingdom 11/04/2016
Lancashire County Pension Fund Asset Owner United Kingdom 10/03/2015
Greater Manchester Pension Fund Asset Owner United Kingdom 06/05/2014
West Midlands Pension Fund Asset Owner United Kingdom 28/06/2011
Merseyside Pension Fund Asset Owner United Kingdom 10/10/2007
London Pensions Fund Authority (LPFA) Asset Owner United Kingdom 16/07/2007
Environment Agency Pension Fund Asset Owner United Kingdom 14/07/2006

Signatories to UK Stewardship Code



Tier 1

Signatories provide a good quality and transparent description of their approach to stewardship and explanations of an alternative approach where necessary.
Avon Pension Fund (PDF)
Bedfordshire Pension Fund (PDF)
Border to Coast Pension Partnership
City of London Corporation
Clwyd Pension Fund (PDF)
Cumbria Local Government Pension Scheme
Derbyshire County Council Pension Fund
Devon Pension Fund
East Riding Pension Fund (PDF)
East Sussex Pension Fund
Environment Agency Active Pension Fund
Greater Manchester Pension Fund
Hampshire Pension Fund
Lancashire County Pension Fund (PDF)
LGPS Central Ltd (PDF)
Lincolnshire Pension Fund
Local Pensions Partnership
London Borough of Camden Pension Fund (PDF)
London Borough of Hackney Pension Fund (PDF)
London Borough of Haringey Pension Fund (PDF)
London CIV
London Pensions Fund Authority (PDF)
North Yorkshire Pension Fund
Shropshire County Pension Fund
Staffordshire Pension Fund
South Yorkshire Pensions Authority
The Tyne and Wear Pension Fund
Warwickshire County Council Pension Fund (PDF)
West Midlands Pension Fund
West Yorkshire Pension Fund
Wiltshire Pension Fund
Worcestershire County Council Pension Fund

Tier 2

Signatories meet many of the reporting expectations but report less transparently on their approach to stewardship or do not provide explanations where they depart from provisions of the Code.
Gwynedd Pension Fund
London Borough of Bexley Pension Fund
London Borough of Ealing Pension Fund
London Borough of Hillingdon Pension Fund
London Borough of Waltham Forest Pension Fund
Merseyside Pension Fund
Rhondda Cynon Taff Pension Fund
Somerset County Council

Investment allocation

Change in allocation chart based on aggregated Net Asset Statements year to 31 March 2021

Investment Assets   2021 2020 Change
Bonds 4.6% 6.3% -1.7%
Equities 13.4% 13.8% -0.4%
PIVS 66.2% 62.2% +4.0%
Property PIVs 4.8% 5.8% -1.0%
Derivatives 0.3% 0.4% -0.1%
Property 2.4% 2.8% -0.5%
Other 2.2% 2.4% -0.2%
Private Equity 3.7% 3.7% -0.1%
Cash deposits 2.3% 2.2% +0.0%
Other balances 0.2% 0.3% -0.1%
Total   100.0% 100.0%  
  Change in allocation chart image
Click on the chart for a larger view in a new tab/window

Asset allocation charts based on aggregated Net Asset Statements as at 31 March 2021

Asset class Asset type   £000s % £000s %
Bonds Bonds 15,546,853 4.6% 15,546,853 4.6%
Equities Equities 45,882,537 13.4% 45,882,537 13.4%
PIV PIV 225,874,363 66.2% 225,874,363 66.2%
Property PIV Property 16,377,455 4.8% 24,397,029 7.2%
Property direct   8,019,574 2.3%    
Other Other 29,623,773 8.7% 29,623,773 8.7%
Total         341,324,555 100.0%

Total asset allocation

Total asset allocation chart image Other asset allocation chart image

Other asset allocation

Asset class Asset type   £000s %
Other Cash Deposits 7,688,587  
  Private equity 12,491,755  
  Other balances 753,603  
  Other (including aggregated private equity/infrastructure/other) 3,248,276  
  Infrastructure 4,366,694  
  Derivatives 1,074,858  
Total     29,623,773 100.0%

Net return on investment based on aggregated Fund accounts year to 31 March 2021

Net return on Investment

Net return on investment % is calculated by dividing the net return on investment by the average value of the fund over the year - this differs from calculated performance.
The average return on investment, and total for the scheme on an aggregate basis, for the year ended 31 March 2021 was +21.1% (2020 -4.4%). The average investment expenses were 0.5% over the period (2020 0.4%), therefore the net return on investment was +20.7% (2019 -4.8%).

The above chart shows the distribution around 21%, for 2021 , with most funds falling in a range of between 15% and 28%. For 2020  the distribution was around -6%, with most funds falling in a range of between -2% and -6%.

Investment Performance

The following market commentary was provided by Pensions & Investment Research Consultants Ltd (PIRC) based on their Local Authority Pension Fund Performance Universe.

This year’s peer group results is based on a Universe of 64 funds with a value of £230bn. This represents some two thirds of local authority pension fund assets and includes all of the Welsh and Northern Pools, all bar one of the London Pool, with funds from all other pools except Central.

LA Market Environment

It was almost as though equity markets worldwide had barely noticed that COVID was locking down most of the world and changing consumer behaviour and working patterns in ways not previously imagined. With an average result of just under 40% equity returns reclaimed the lost performance of 2019/20 and much more – over the last two years they delivered an average return of 11.4% p.a. - well ahead of even the most optimistic forecasts.
The speed and scale of the equity market rebound in 2020 resulted in the best annual return since the post global financial crisis in 2008/9. This brought long term performance back in line with funds historic experience. Over the last thirty years there have only been three periods of negative returns, of which the latest was the shallowest and shortest. 

LGPS Performance – Last 30 Years

In the latest year UK Equities delivered a return of 30%. This was ahead of the All-Share index by some 3%, a second good year for active managers. However the market return was well behind that which was achieved elsewhere. Funds that retained a high commitment to the domestic equity market would have underperformed their peers. The proportion of UK equities in the average fund continues to decline. This is not just as a result of poor relative market performance but also due to a strategic move into a global allocation of equities.

At the end of March 2021 the level of equity assets managed passively was 26%, down from 30% at the end of the previous year. This difference is due to the outperformance of active managers last year. In 2020 the median global active equity Manager performance was 2.2%, broadly in line with the equivalent measure this year. However in 2020 the upper quartile (top 25%) outperformed by 4%. This year the outperformance is more than twice that level.

Bond returns were mixed – multi asset credit funds had performed badly in the COVID induced market panic of the first quarter of 2020 but have performed well in the latest year and more than recouped their losses. Funds that held bond portfolios benchmarked against government bond indices performed relatively poorly relative to those benchmarked against an absolute return.

While private equity continued its run of exceptional performance and hedge funds had an equally strong year, private debt fared less well. Infrastructure, one of the sectors most impacted by the global lockdown, performed poorly. It delivered a return of 1% for the year.

At the end of March 2021 half the funds in the Universe had some investment in bespoke low-carbon / climate aware equity vehicles. This represented 11% of all equity investment.

Average Asset Allocation – Last 10 Years