Schroders and Room151 have teamed up for the second year to collate response from the Local Government Pension Scheme (LGPS) and advisers on investment trends and current sentiment within in the sector.
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To access the survey, click here.
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This year’s LGPS investment survey takes place against the backdrop of the biggest overhaul of the scheme since the introduction of pooling in 2015. Immediately after taking office, the Labour government announced its intention to reform the scheme in a bid to enhance its cost effectiveness and attract more investment to UK assets.
The survey is timed to coincide with the government’s pension investment review and aims to feed into the ongoing debate about the future of the LGPS. The survey focusses on five areas, generating a snapshot of where the LGPS community stands on:
- the future of the LGPS
- trends within asset allocation and cashflow management
- levelling up and local investment
- private market strategies and
- how to tackle climate change.
Paul Myles, director Private Assets at Schroders said: “The LGPS are facing many challenges and topics for consideration , given the new administrations rhetoric on the future of the LGPS as well as the legacy left by the last administration as set out in the Autumn Statement of 2023.”
Reforms ahead
Do LGPS investors approve or disapprove of the push to invest more in UK assets? Are they in favour of greater consolidation and larger pools or would they prefer the status quo? The survey will provide a vital snapshot of the sentiment within the scheme.
Political reforms aside, many LGPS funds and pools are also considering drastic changes to their asset allocation. Last year’s survey highlighted a shift towards private markets and real estate. This prediction has indeed played out across the scheme, with every single pool launching new private market strategies. In line with our survey findings, private credit and real estate have been the most popular strategies in terms of new fund launches. They have also been the most popular funds attracting new investments, as the Annual Reports for London CIV, Border to Coast and LGPS and LPPI indicate.
New challenges
But while inflation has come down, higher borrowing costs and record levels of dry powder pose new challenges for alternative assets. Will the trend towards private markets continue? How important is inflation hedging, given that price rises have now reached more comfortable levels?
These changes are also expected to play out in place-based or local impact investments which were until recently labelled under the “levelling up banner”. Last year, residential housing came up as a clear favourite among survey respondents, a trend which might neatly align with the current political agenda. But a clear majority also felt that levelling up should fit within the existing investment strategy, does this scepticism still stand? Our survey looks to offer vital insights.
One trend that remains persistent is the climate crisis and subsequent pressures on pension funds to decarbonise portfolios. With a host of new policy incentives announced, we ask whether there is LGPS appetite for renewable energy and energy transition assets increasing.
A voice for the LGPS
Since Labour’s election to government and arguably in the years before that, there has been much talk about the LGPS, often dominated by policy makers and newspaper headlines, rather than the LGPS itself. Our survey aims to counter that by lending a voice to the LGPS itself.
Conducted annually and anonymously, the survey offers a unique opportunity to share perspectives on the state of the scheme. We would therefore welcome responses from administering authority pension officers, pension directors, LGPS senior officers, S151 officers, independent investment advisors, chairs of LGPS investment committees and LGPS pool investment practitioners.
It runs until the 15th of October and the results will be covered on the Room 151 site, as well as at Room151’s LGPS Investment Forum on 5th November where Paul Myles of Schroders will examine the findings and present a special report to delegates.
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To access the survey, click here.
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