English and Wales Pension Funds Set to Invest More in Private Markets

By David G. Barry

Local government pension schemes in England and Wales appear poised to increase their allocations to private markets.

Alpha Real Capital surveyed 100 LGPSs in April and found that 91% expect over the next five years to increase their allocation to the investment segment, with the majority – 60% – expecting allocations to rise by between 5% and 10%. In a 2021 study of 100 U.K. professional pension fund investors, more than half said they allocated up to 25% to illiquid assets as part of their investment strategy.

The pension schemes, according to the study, are showing greater interest in private markets because of the greater transparency around the asset class, the increased opportunities to deploy capital and a desire to diversify their portfolios.

In a statement, Boris Mikhailov, Real Alpha’s head of client solutions, said, “private markets, and in particular secure income real assets, are growing in popularity amongst LGPS Funds as they offer the potential to provide secure, inflation-linked cashflows to help meet liabilities in an inflationary environment. It is also important to note that secure income real assets like social or renewable infrastructure have quantifiable and measurable ESG benefits. It is possible to invest in these assets to help with ‘E’ or ‘S’ in ESG without sacrificing much needed investment performance.”

Alpha Real is a specialist real assets investment manager focused on secure income strategies and invests in U.K. and European assets. It has £4.7 billion  (US$5.68 billion) under management.