Investment allocation

Change in allocation chart based on aggregated Net Asset Statements year to 31 March 2022

Investment Assets   2022 2021 Change
Bonds 3.4% 4.6% -1.2%
Equities 11.9% 13.4% -1.6%
PIVS 67.3% 66.2% 1.1%
Property PIVs 5.2% 4.8% 0.4%
Derivatives 0.3% 0.3% 0.0%
Property 2.6% 2.4% 0.2%
Other 2.9% 2.2% 0.7%
Private Equity 4.2% 3.7% 0.6%
Cash deposits 2.0% 2.3% -0.2%
Other balances 0.3% 0.2% 0.0%
Total   100.0% 100.0%  
  Change in allocation chart image
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Asset allocation charts based on aggregated Net Asset Statements as at 31 March 2022

Asset class Asset type   £000s % £000s %
Bonds Bonds 12,329,845 3.4% 12,329,845 3.4%
Equities Equities 43,588,165 11.9% 43,588,165 11.9%
PIV PIV 247,569,745 67.3% 247,569,745 67.3%
Property PIV Property 18,943,222 5.2% 28,441,612 7.7%
Property direct   9,498,390 2.6%    
Other Other 35,851,433 9.7% 35,851,433 9.7%
Total         367,780,800 100.0%


Total asset allocation

Total asset allocation chart image Other asset allocation chart image

Other asset allocation

Asset class Asset type   £000s %
Other Cash Deposits 7,531,419 21.0%
  Private equity 15,565,161 43.4%
  Other balances 938,863 2.6%
  Other (including aggregated private equity/infrastructure/other) 3,992,317 11.1%
  Infrastructure 6,638,581 18.5%
  Derivatives 1,185,092 3.3%
Total     35,851,433 100.0%


Target/Strategic versus Actual Asset Allocation

The following pie charts provide an indication of the overall target versus realised asset allocations for the LGPS and a breakdown of the pooled investment vehicles into asset classes.

The analysis is based on 72 out of 87 funds due to the unavailability of data, or the inconsistency between reporting methodologies. Funds which did not provide at least a draft annual report have been excluded, as have funds where published target and/or actual asset allocations could not be reasonably allocated into the designated categories.

Total asset allocation

Target asset allocation

Total asset allocation chart image Target asset allocation chart image



Net return on investment based on aggregated Fund accounts year to 31 March 2022

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 +8.6%  (2021 +21.1%). The average investment expenses were 0.5% over the period (2021 0.5%), therefore the net return on investment was 8.1% (2021 +20.7%).

The above chart shows the distribution around 8.6%, for 2022 , with most funds falling in a range of between 5% and 10%. For 2021 the distribution range was around 13%, with most funds falling in a range of between 15% and 28%.


Investment Performance

The following market commentary was provided by Pensions & Investment Research Consultants Ltd (PIRC) in their annual review. It is based on analysis of a 'Universe' of 63 funds, representing some two thirds of local authority pension fund assets and includes all of the Wales Pensions Partnership and Northern Pool funds, all bar one of the London CIV funds, with funds from all other pools except LGPS Central.

LGPS Performance – Last 30 Years


LA Market Environment


Equity Returns were positive despite the downturn. The strong equity returns that funds had experienced since the second Quarter of 2020 continued in the latest year. Funds gave up some of the return in the first quarter of 2022 after Russia’s invasion of Ukraine. The potentially massive global implications on energy, food availability and cost, supply chains, economic growth raised concerns and rising inflation took hold. 
In the latest year, the average fund delivered a global equity return of 8.4%. This was well below the MSCI All Countries index, which returned 12.4%. UK equity investments delivered an average return of 9.6%. This was ahead of overseas markets, for the first time in seven years and reflected the UK’s low exposure to technology stocks and higher commitment to oil & gas. Emerging markets struggled against the twin headwinds of a strong dollar and rising commodity prices. The average fund saw these investments fall sharply, returning -9.6% for the year. The average fund now holds only 20% of its equity assets in the UK. Only twenty-six funds continue to hold a bespoke UK equity allocation.
At the end of March 2022 two thirds of the funds in the Universe invested in some form of low carbon / climate aware equity vehicles. This represented just under a quarter of all equity investment. Green indices generally performed better than the broad market indices in the latest year. The level of commitment to these investments continued to range widely across the invested funds.


Bond returns fell as interest rates rose around the world. While inflation-linked assets performed better they too gave up some of their return in the first quarter of 2022 against the headwinds that were being faced. Private debt continued to attract investment and was the best performer in the fixed income area. 

Private Equity

Private equity delivered a return of almost 35% for the year. This continues an exceptional run of performance. It should be noted however that private markets are illiquid and pricing is likely not to fully reflect the downturn of the first quarter of 2022. The challenges that are facing equity markets are likely to have a similar impact on these investments which are also likely to face more scrutiny around their environmental, social and governance (ESG) practices.


Infrastructure has continued to see positive flows, much of this into green/ renewable investments. Further flows are being slowed down by the high demand for what is currently a limited pool of high quality assets. The sector delivered well in the latest year for investors after a depressed period of results during the pandemic. Absolute return investments delivered an average return of around 5%, below the return of other alternatives but broadly in line with benchmarks.


After a particularly difficult year for property investors where COVID impacted the sector through vacant properties, rent arrears, and rental holidays the latest year saw a strong bounce-back. The average fund achieved a return of just under 18% for the year as capital values increased strongly, the industrial sector most positive.

Active Management

Active equity management has not delivered for most funds over the longer term. Pension funds mistime manager change and historically hired managers on the back of strong recent performance and then dispensed with them following performance disappointment. The cost of these changes had had a substantial impact on the performance of the LGPS and funds who have performed best have avoided manager change – maintaining long term relationships with managers that have allowed them to retain confidence through economic cycles.

Strong results in the past two years were largely wiped out by the marked underperformance of most active managers in the latest year. Over the last five years almost no actively managed global equity portfolio has achieved a +2% pa return ahead of benchmark - the common target.


Longer Term Asset Allocation

Average Asset Allocation – Last 10 Years

Whilst at a high level the only significant change over the last ten years has been a move from equities to alternative assets at a lower level there has been much going on. Equity portfolios have moved from having a high UK commitment to being much more globally invested. Within bonds funds have moved from holding mostly UK government securities to a broad mix of strategies, many not linked to an underlying index. Diversified growth has remained a minor asset class, hampered by performance disappointment, whilst infrastructure which was almost unseen a decade ago now makes up a third of the alternative asset allocation. This growth will continue as the government seeks to legislate for the LGPS to invest.