Investments and Funding 

Asset Allocation  

Set out below is the scheme-level asset allocation based on the more granular asset classifications for the year ended 2024, together with the respective weightings of these asset classes in total net assets. 

Progress with pooling 

In their Annual Reports, funds were required to provide data on how far they had implemented the Government’s policy on pooling their assets in their chosen LGPS pool by the end of the year. Only 69 out of 87 funds included this table within their annual reports. This data is summarised in the table below: 

Investment in the UK 

For the first time in 2023-2024, funds were asked by Government to set out the amounts which they allocated to UK listed equity, UK Government bonds, UK infrastructure and UK private equity in a supplementary table, including through the pools. For these purposes, UK listed meant amounts invested in equities listed on a recognised UK exchange (irrespective of the underlying operations of the company). The table below summarises the data reported, noting that as this is the first year of this data collection it was to be completed in a “best endeavours” basis. 

*This table only includes data from the 57 out of 87 pension funds who included this table in their annual reports. 

PIRC Study of Investment Performance 

The following market commentary is taken from analysis that has been provided by Pensions & Investment Research Consultants Ltd (PIRC) in their annual review. It is based on analysis of a 'Universe' of 62 funds in England and Wales plus one Scottish fund (Strathclyde). These funds represent some two thirds of local authority pension fund assets and include all 8 of the Wales Pensions Partnership and the 3 Northern LGPS funds, all bar one of the London CIV funds, with funds from all other pools except LGPS Central. 

The following table (produced by PIRC) summarises the performance of assets held in the different pools, although these differences are largely attributable to available asset allocation. 

Please note that in this section, the following definitions apply: 

“Pooled” means that the investment has been made in a collective investment vehicle or segregated management arrangement for which the LGPS asset pool is accountable (by regulation or contract). Assets invested through the fund’s chosen pool in a vehicle managed by another LGPS pool are considered pooled.  

“Under pool management” means that the pool is responsible for the oversight or discretionary management of the investment, whether or not procured through the pool, (including passive market index tracker funds procured before pooling). In these cases, a description of the nature of the pool’s role in oversight or management should be added. 

“Not pooled” means that the asset is neither pooled nor under pool management. 

Long-term returns on investment 

In recent years, returns have been very clearly impacted by global political and economic factors and so are not delivered consistently. The below graph has been provided by PIRC:

Longer term results 

The best results over the longer term have been delivered by equities. 

Over the medium-term private equity has delivered the best returns, delivering results around 4% above quoted equity. 

Property performance has been poor over the recent past. 

Bonds, the worst performing of the major asset classes, continue to deliver a return below CPI over the last ten years. The below graphs have been provided by PIRC. 

Longer term results remain well ahead of inflation and funds’ actuarial assumptions

Investment Costs 

SF3 data shows that investment costs have also risen over time. In 2017-18, investment costs were in the order of c£1 billion. The latest SF3 data return shows cost have risen to c£1.8 billion but it is important to also look at them as a percentage of asset values, as illustrated in the chart below. 

Latest Year Returns 

The average fund delivered a return of 9.2% in the last year. 

Equities delivered over 16% for the year while most other asset classes produced low single digit returns. 

Asset allocation was, therefore, a key driver of relative performance. Funds with a high equity allocation outperformed their more risk averse peers. 

However, for the third year in succession most active equity managers failed to add value. 

Bond performance was mixed. with diversified strategies comfortably outperforming government issue. 

Returns from illiquid assets were relatively flat with private debt performing relatively strongly. 

Property saw a further strong decline in values over the year.