Local Government Pension Scheme (LGPS) Funds in England and Wales are set to increase their allocation to private markets, according to new research from Alpha Real Capital (Alpha).
Over the next five years, 91% of LGPS professionals surveyed believe the funds they work for will increase their allocation to private markets with the majority, 60%, thinking their allocation will rise by between 5% and 10%.
Alpha says this is part of a trend of institutional investors increasing their allocation to illiquid assets, which are providing increasingly attractive returns and diversification benefits in an ever more uncertain world.
A study carried out last year with 100 UK professional pension fund investors by the specialist real assets manager found schemes already have substantial allocations to illiquid assets – around 58% of investors said their scheme allocated up to 25% to illiquid assets as part of their investment strategy, and 37% said they allocated up to 10%.
The study found the main reason for increasing interest in illiquid assets is greater transparency around the asset class – 79% of those pension professionals surveyed last year said that they planned to increase allocations because of this. However, 69% said increased opportunities to invest in illiquid assets is driving interest, and 44% of those questioned said they are increasing allocations to illiquid investments because of a growing desire to diversify their portfolios.
