A requirement for local government pension funds to invest in local levelling up projects could mean them failing to get the best returns for retirees, the boss of a leading asset management firm has claimed.
Gordon Ross, chief investment officer at Local Government Pension Scheme (LGPS) Central, believes that the government’s newest town hall scheme, one of Britain's largest, could create conflict as trustees of pension funds have a duty to secure the best returns for clients.
Midlands-based LPGS (Central) looks after eight local authorities' pension funds worth a total of £55bln.
Ministers are hoping that they can increase local investment by boosting town hall resources through their pension funds investing up to 5% of their portfolios.
With more than £16bln in these local pension funds, the plans are aimed to help “level up” poorer areas by building new infrastructure like houses and helping finance small businesses.
“LGPS funds are global investors, and their governing bodies have to ensure that their investments will meet their fiduciary duties and provide the outcomes that fund members and employers need,” said Ross.
The pension chief added special investments may not always meet these requirements, with every movement of funds “looked at very carefully through a risk and return lens.”
Instead, Ross believes that creating a nationwide pot to which funds like LGPS can contribute would open “a broader set of opportunities” and be more effective in helping to level up areas.
The news comes at a time when the government also wants to launch a multi-billion-pound fund for UK tech start-ups called the ‘future growth fund’.
The pension industry has already indicated worries about any plan that would require it to contribute to the scheme.