How we invest

The value of LPFA’s pension fund (the ‘Fund’) was £6.05 billion as at 31 March 2019


LPFA’s overarching fiduciary duty is to ensure we have sufficient assets available to pay members all the benefits as they fall due. To fulfil its duty, the LPFA Board approved an Investment Strategy Statement (ISS) in May 2019 which clearly sets out the Fund’s investment objectives and policy as follows:

  • maximise the returns from investments whilst keeping risk within acceptable levels and ensuring liquidity requirements are at all times met;

  • contribute towards achieving and maintaining a future funding level of 100%; and

  • enable employer contribution rates to be kept as stable as possible. 

You can download the latest Solvency Report here.

The ISS also sets out the Fund’s strategic asset allocation framework and its commitment and approach to responsible investment. The LPFA Board reviews the ISS on a regular basis and at least every three years.

The day-to-day investment implementation and management are delegated to Local Pensions Partnership Investments Ltd (LPPI) which is authorised and regulated by the Financial Conduct Authority (FCA). LPPI is a fully-owned subsidiary of Local Pensions Partnership Ltd (LPP) formed following the collaboration between LPFA and Lancashire County Pension Fund (LCPF). Investment performance are reported annually in LPFA’s annual report

You can download the latest Investment Performance Report here.

As an active shareholder in LPP, the Board’s role is to ensure that LPP and LPPI remain accountable and provide the necessary assurance to LPFA, its employers and members that LPFA continues to benefit from this delegation arrangement.


Strategic Asset Allocation

The LPFA Board is responsible for setting the high level investment objectives and risk tolerances of the Fund, with the advice provided by LPPI. The Board sets, in conjunction with the Fund’s actuary, the required rate of return needed to achieve the Fund’s investment objectives and the risks it is willing to take.

LPFA’s asset allocation framework allocates capital across a total of eight asset classes combined to form the policy portfolio. Each asset class has its own specific investment objective, and within each asset class there are a number of constraints to allow for intra-asset class diversification, including sector, country, manager, and maximum exposure to a single asset. 


Investment Governance

Day-to-day implementation and monitoring of the Board’s high level investment objectives are delegated to LPPI in line with the principle of asset pooling within the LGPS. 

LPFA’s role is to ensure that LPPI has appropriate and sufficient risk monitoring and management processes in place to perform its duties and to manage the Fund in accordance with the ISS and the Funding Strategy Statement.   

The Board will monitor the performance of LPPI and the portfolio through regular reporting and discussion. 

Risk Management 

The function of the LPFA’s Audit and Risk Committee is to monitor the operation of internal control, governance, risk and compliance arrangements. As part of this, the Committee is tasked with monitoring risk management systems including reviewing the risk framework and processes used to monitor the Fund’s risks. LPPI provides LPFA with asset and liability risk management services that include reporting covering risk exposures, scenario and sensitivity analysis. LPPI also provides employer risk services to manage risks associated with employer covenant.


Asset Classes

LPFA invests in the following asset classes, managed by LPPI. There are other individual assets which are also held by LPFA outside of these funds and managed by LPPI. Details of these can be found in the annual report or the latest investment report.


LPPI Credit Fund

About the Fund

LPFA is an investor in the LPP Investments Ltd Credit Fund. The following tells you a bit more about how the fund is invested:

LPP Investments Ltd Credit Fund seeks to gain exposure to diverse sources of return linked to global credit markets and credit instruments.

The fund seeks balanced exposure to the global credit sectors including:

Diversified Credit – global corporate bonds and bonds issued by non-government institutions, providing a wide spread of exposure and ease of access (liquidity).

Emerging Markets Debt – credit instruments / bonds issued by governments, institutions and companies located in emerging markets to give exposure to growing emerging economies of the world.

Direct Lending to companies – specialist managers skilled in lending to carefully researched borrower companies to generate diversified returns.

Debt secured on Real Assets - specialist managers skilled in lending to companies with real assets, such as property and infrastructure (e.g. renewable energy).

Credit opportunities – investing in a globally diversified and complimentary portfolio of managers specialising in higher risk / potentially higher return credit strategies.

LPPI Fixed Income Fund

About the Fund

LPFA is an investor in the LPP Investments Ltd Fixed Income Fund. Fixed-income securities are used to diversify a portfolio, as they reduce the overall risk of an asset allocation or investment strategy weighted heavily in equities.

The following tells you a bit more about how the fund is invested:

LPP Investments Ltd Fixed Income Fund aims to deliver optimal long-term risk-adjusted returns, capitalising on opportunities in the global fixed income market, with a strong focus on capital preservation. It invests predominantly in higher credit quality, highly liquid fixed income instruments across geographies, instrument types and maturities.

The fund is a fund of funds and seeks balanced exposure to the global fixed income via carefully selected external specialist investment managers that complement each other.

The fund has the following characteristics:


Bias towards high quality issuers

Most of the holdings in the fund have credit ratings of High Grade (AA) or higher; lower risk of defaults


Highly liquid

Easier for managers to buy or sell, in good times and bad


Cash preservation bias

In keeping with investor expectation from the asset class


Active management

LPPI prefers active rather than passive investment, as managers can a) apply risk controls at the individual stock level and b) target outperformance


Target performance – 1-month GDP LIBOR +2%

Achievable target that does not force the managers to take unnecessary risks

LPPI Global Infrastructure Fund

About the Fund

LPFA is an investor in the Global Infrastructure fund managed by LPP Investments Ltd.

Global Infrastructure is the basic (physical) structures and services essential to the operation of society. It is essential to global economic growth. It also includes more recent infrastructure sub-sectors such as wireless towers, renewable power and satellites.

The following chart tells you a bit more about how the Global Infrastructure fund is invested:

The global infrastructure fund seeks to gain cost-effective, diversified exposure to global infrastructure assets, predominately in the UK, Europe and North America. It invests via primary infrastructure funds, co-investments and direct ownership in infrastructure assets.

Exposure to UK infrastructure is achieved via investment in GLIL, which is a fund jointly managed by LPPI and other LGPS funds.

Direct assets – Direct ownership, financing and management of infrastructure assets or projects.

Indirect Funds – Funds that invest in the shares, secured loans or securitised debt instrument of infrastructure companies, infrastructure capital companies infrastructure projects or special purpose vehicles and other permissible assets including revenue generating projects of infrastructure companies or projects.

Co-investment- With other investors where it is mutually beneficial to work together to finance, own and manage infrastructure assets or projects.

GLIL – UK focused fund managed by four LGPFs (including LPP) designed specifically for very long-term investors in the LGPF Funds sector.





LPPI Private Equity Fund

About the Fund

LPFA is an investor in the Private Equity vehicle managed by LPP Investments Ltd. As a source of investment capital, private equity investors purchase shares of private companies, to develop them and either sell them on or list them on a stock exchange (take them public) for profit.

The following chart tells you a bit more about how the Private Equity vehicle is invested:













LPP Investments Private Equity IPV seeks to provide investors with long term total return by accessing attractive private equity opportunities at a competitive overall cost.

LPPI seeks balanced exposure to the global private equity via the following routes:
Primary – investments are made through funds into a portfolio of companies. It is an effective way to obtain a diversified exposure to the private equity asset class.

Secondary – this involve buying and selling pre-existing investor commitments to private equity funds. It provides liquidity to the process and allows “direct investors” to liquidate their positions.

Co-investment- this is an investment directly into a company alongside other investors, private equity fund managers and/or venture capital firms.

Direct– as the name implies, this is when an investor directly invests in a private company. It could be buying the entire company or a minority interest.

 Allocation of LPPI Private Equity VC 0.9%, Growth Equity 25.2%, Buyout 73.9%












Buyouts - A buyout typically targets the acquisition of a significant portion or majority control of businesses, which normally entails a change of ownership.

Venture Capital - investing in companies that have undeveloped or developing products or revenue.

Growth Equity - This is a type of Private Equity investment, usually a minority investment, that is made in relatively mature companies that are looking for capital to expand or restructure operations, enter new markets or finance a significant acquisition without a change of control of the business.

Special Situations - A special situation refers to particular circumstances involving a company that would compel investors to buy it based on a “special situation”, rather than the underlying fundamentals of the company or some other investment rationale.

LPPI Global Equities

About the Fund

LPFA is an investor in the LPP Investments Ltd Global Equities Fund. The following tells you a bit more about how the fund is invested:

The LPPI Global Equities Fund seeks long term total return from investing in global public equities while controlling return from investing in global public equities while controlling exposure to fundamental business risk. This aim is pursued by investing in underlying funds, which may be managed internally investing in underlying funds, or by external third parties whose investment approach is consistent with the Fund's investment objectives and restrictions.

The Fund will typically be biased towards active management of quality companies without constraints to invest according to any specific index construction. It seeks to outperform the MSCI All Country World Net of Dividends Index (MSCI ACWI ND) over a full market cycle.

Makeup of the fund:

The internally equity portfolio managed by LPPI represents c.40% of the LPPI Global Equities fund. This internal mandate focuses on large cap Quality Companies, which are held for the long-term.

The overall makeup of the fund as at 31st  August 2019 was as follows:

Including the internal portfolio, the fund is biased towards quality companies. This is allocated to specialist fund managers in all-cap and smaller companies, as well as larger companies of the internal fund.
Emerging Markets                                                      4.7%                   Investing in companies from some of the world’s fastest growing economies                                                                                                                              
Value                                                                15.6%                In this case, value investing aims to capture excess returns from companies that have low prices relative to their fundamental value. Value strategies often perform well when quality strategies are not.
 Low volatility                                        14.6%     Low volatility stocks are those that simply display low average variation in their prices as measured by statistical measures.

LPPI Diversifying Strategies

About the Fund

LPFA is an investor in the LPP Investments Ltd Diversifying Strategies Fund. The following tells you a bit more about how the fund is invested:

The strategy seeks to generate a diversifying source of return distinct from global equity and bond markets.

It looks to exploit a broad range of relative value and macro directional opportunities in global capital markets. The investment mandate seeks investments in a variety of alternative strategies where the drivers of return are not primarily dependent on market factors.The Fund will seek a risk balanced exposure to investment strategies, including but not limited to:

Relative value strategies – With flexibility to exploit single stock performance and other types of risk return investing, by investing in specialist funds:

  • Equity market neutral - strategies that seek to exploit investment opportunities unique to some companies while maintaining a neutral exposure to the market.
  • Credit relative value - strategies that seek to take advantage of price differentials between related corporate bonds, by simultaneously buying the ones expected to do well and selling the ones expected to do badly — thereby allowing investors to potentially profit from the “relative value” of the two.
  • Fixed income relative value - seeking to benefit from the relative mis-pricing of government bonds.

Macro & directional strategies – Strategies that can be implemented across multiple markets.

Alternative investment strategies – specialist strategies that invest in asset classes whose performance drivers are different from traditional asset classes. Examples include insurance.

Currency This is similar to Credit relative value in that currency strategies exploit the differences between exchange rates; for example, the Australian dollar relative to the Swiss Franc.

LPPI Real Estate

About the Fund

LPFA is an investor in the LPPI Real Estate Fund, a sub-fund of the LPPI Real Estate ACS. The following tells you a bit more about how the fund is invested:
The Sub-fund seeks a total return (comprising income and capital growth) exceeding that of the Consumer Prices Index by 3% to 5% each year measured over a rolling 10 year period net of all fees and expenses at portfolio level.
Launch date: 1 October 2019
Fund size: £820m (at 1 October 2019)


Residential In the context of investment, Residential can includes new construction, social and affordable housing for rent or lease. It may also include co-operatives, housing associations, university halls of residence and nursing accommodation. It does not include the owner occupier sector.
Agriculture Farm land and agricultural real estate, buildings, depots, storage and farms are included in this sector. It may include all areas of agricultural activity including vineyards, orchards, livestock and arable in the UK and overseas.
Office As its name implies, this may include all forms of office / business premisis that is not specifically manufacturing or industrial. 
Retail The Retail sector in Real Estate is the generic name for shops, shopping centres or malls and retail parks.
Industrial Industrial real estate is comprised of properties used for manufacturing and production: factories, plants, well as warehouses. The buildings can be used for research, production, storage, and distribution of goods. Some buildings that distribute goods are considered commercial real estate.