UK Local Government Pension Schemes Leading Investment in Private Markets with Billions in Tender Issuances

UK local government pension schemes (LGPS) are making waves in the investment world as they issue tenders set to be worth billions of pounds in the coming years. The most recent development comes from the ACCESS Pool, a partnership of several council pension funds, which is seeking private equity allocators for a massive GBP35 billion mandate.

This move is part of the third phase of the ACCESS Pool’s private markets programme, which has seen a steady increase in private markets assets, including infrastructure and real estate. The annual commitments for the private equity allocation are expected to be worth GBP500 million on average each year, with a potential total assets of GBP4-6 billion.

But the ACCESS Pool is not alone in its quest for private market investments. Other local authorities, such as the Wales Pension Partnership and the West Sussex Pension Fund, have also issued tenders for real estate sub-funds and property managers. Additionally, the Border to Coast and LGPS Central pension pools have announced multi-million-pound global real estate commitments.

These tenders align with the government’s push for LGPS to invest 10% of their assets in private equity, as confirmed by Chancellor Jeremy Hunt. The government hopes to use these investments to support its net zero and levelling up ambitions, as well as to boost UK businesses.

However, some LGPS schemes have expressed concerns about government interference in their investment strategies. A large proportion of respondents opposed the 10% target to private equity, citing potential conflicts of fiduciary duty and a desire to reduce exposure to risk.

Despite this, the LGPS Advisory Board has noted the strong funding levels of many public pension funds, leading them to seek ways to manage volatility and reduce exposure to risk. As the debate continues, it is clear that the UK’s local government pension schemes are at the forefront of investment trends, poised to make significant contributions to the financial landscape.