While just 8% of the LGPS practitioners surveyed believe the current six pools and 86 funds represent the eventual end state for the LGPS, the focus is increasingly on how the new pooling model works in practice through increased capacity. Some 60% of pools are recruiting to meet their new responsibilities, while around 60% still expect to outsource mandates. At the same time, two thirds of funds surveyed (66%) want greater alignment and flexibility from their pools.
Local investment has also emerged as another key implementation challenge. Half of pension fund (50%) respondents identified sourcing and assessing suitable local investment opportunities as the hardest part of the Fit for the Future reforms to implement, while 69% cited a lack of investable opportunities capable of delivering appropriate financial returns as a barrier to place-based investing.
Meanwhile, more than half of LGPS professionals (55%) are increasing or considering increasing their allocation to gilts, as improved funding levels prompt a significant shift in investment strategy.
This allocation compares with 37% in 2025 and 24% in 2024, in part reflecting the higher yield environment. Ten-year gilt yields have risen from around 4.4% in early January to 5.4% as of October 2026, following the closure of the Strait of Hormuz and are close to their highest level since 2007.
The shift comes as private markets allocations are also becoming increasingly selective. While 34% of respondents expect to increase private markets allocations, investors are placing greater emphasis on the characteristics of individual investments. Risk-adjusted returns are the overriding priority for 67%, while the exit environment (48%) and valuations (44%) are the biggest concerns. Against this backdrop, infrastructure remains resilient, with almost half (49%) identifying it as best placed to provide inflation-linked cashflows.
The survey of 89 LGPS practitioners provides insights into the changing priorities of the Local Government Pension Scheme. Now in its fourth year, the research covers five key areas: the future of the LGPS; strategic asset allocation; place-based investing and social impact; private markets; and net zero and sustainability.
Paul Myles, Head of LGPS at Schroders, said: “Improving LGPS funding levels are having a clear impact on asset allocation. The increased appetite for gilts and a more selective approach to private markets, demonstrates how LGPS investors are increasingly focused on securing their positions and delivering the long-term outcomes required for their members. At the same time, the LGPS has undergone significant change, and these findings suggest its focus now is firmly on implementation. Pools are building capabilities, while funds want pools to offer better alignment and flexibility in implementation.”
Mona Dohle, LGPS editor at Room151, said: “Pools and funds have told us they are now working hard on putting the Fit for the Future Reforms into practice, with new rules around local investment and a strong focus on building in-house capabilities emerging as key themes. There is now also growing concern about political risk with nearly a third of respondents telling us they worry about a backlash against ESG investing.”
|
.jpg)
(2).jpg)