Change in allocation chart based on aggregated Net Asset Statements year to 31 March 2022
Asset allocation charts based on aggregated Net Asset Statements as at 31 March 2022
|Asset class||Asset type||£000s||%||£000s||%|
|Asset class||Asset type||£000s||%|
|Other (including aggregated private equity/infrastructure/other)||█||3,992,317||11.1%|
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
Net return on investment based on aggregated Fund accounts year to 31 March 2022
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%.
LA Market Environment
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
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.