The Local Government Pension Scheme (LGPS) increased its funding level to 98% in 2019, up from 85% three years earlier.

The LGPS deficit stood at just £6 billion last year, compared with £37 billion in 2016, after generating a net investment return of 6.6%. That was higher than the 4.4% return recorded a year earlier.

During the year, there was an increase in ESG investment across a range of funds, continued allocations into enhanced index/smart beta investments, including low volatility, and an increase in the level of passive equity investment.

Bond investment also became more diverse as funds invested into multi-asset credit, private debt and secured property income funds. The move into pooled assets began in a significant way, which meant fund manager changes were well up on average, the report stated.

Allocations to pooled investment vehicles across the LGPS jumped 11% during the year to almost 61%. Meanwhile equity allocations declined by almost 12% to just under 17%.

Commenting on the report, Pensions Investment and Research Consultants said the “respectable” 6.6% return was generated despite “unease over historically high levels of markets, political uncertainty, the escalating trade war between the US and China and the ongoing unresolved issues around how, or even if, the UK would leave Europe all impacted sentiment and made for a volatile year.”


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Published: August 1, 2020
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