Spotlight on UK LGPS: LPPI doubles assets to £60bn, boosts headcount and eyes co-investments

Local Pensions Partnership Investments (LPPI) is one of the six local government pension scheme investment pools recently given the green light by the UK government in its so-called ‘fit for the future’ reforms. Matthew Graham, chief client and partnerships officer at LPPI, says the pool has reshaped its corporate structure as it has expanded to serve nine partner funds from just three previously, as AUM has almost doubled to £60bn (€70bn). Focus is now set to shift to how the expanded business should look in the long term.

LPPI has spent the past two years preparing for the changes. This year it has focused on bringing its six new partner funds – which are both clients and shareholders – on board, establishing a new corporate structure, and adapting to new regulatory requirements introduced through the reforms, which led to Brunel Pension Partnership and ACCESS winding up operations.

The first two stages of the process, Graham says, have been onboarding new partner funds and implementing new regulatory requirements.

Restructuring the business

One of the most significant changes has been to separate LPPI’s investment business from its administration operation. The restructuring was partly driven by the need to accommodate the six incoming funds, but it also gave all nine partners the opportunity to establish a new framework for how the expanded investment business would be owned and governed.

Rather than simply adding the new funds to an existing shareholder arrangement, the nine partners determined where decisions should sit between the executive, LPPI’s independent board, the holding company and themselves as shareholders.

The distinction between shareholder and client has also become more important. The shareholder agreement determines how the business is owned and governed, while investment agreements set out what partner funds delegate to LPPI and what they expect the pool to deliver.

That has allowed LPPI to move towards a more structured model as the number of partner funds has increased.

From three partners to nine

The expansion has also changed how LPPI works with its partners. Graham says: “The original three could feel outnumbered by the six new funds, but that did not happen.” Instead, he notes the incoming funds were keen to understand the experience of the existing partners and what could be improved.

The expanded partnership has therefore prompted a more formal approach to engagement, with shareholder-level discussions and working groups providing a framework for the nine funds to have a voice.

The focus is on creating a consistent approach which recognises that the partners remain distinct organisations with their own investment strategies and requirements.  

That distinction is particularly important for investment strategy. LPPI is responsible for implementation, while partner funds retain responsibility for their strategic asset allocation and investment objectives.

The challenge, according to Graham, is therefore to find areas of commonality without requiring all nine funds to have identical investment beliefs.

Making use of scale

The expansion has also increased LPPI’s ability to use scale in investment implementation.

The pool already had capabilities across private markets, real estate, equities and fixed income before the changes, but greater scale has given it more capacity to pursue larger opportunities, strengthen its negotiating position with managers and increase its influence as an investor.

“Scale is a benefit, but it has to translate into value for the partner funds”

Matthew Graham at LPPI

Private markets are one particular area where the benefits of scale should become apparent, according to Graham, with larger allocations giving the pool greater influence with managers and potentially the ability to pursue direct investment and co-investment opportunities.

The aim is not simply how to become bigger but to use scale to improve outcomes for partner funds, as Graham highlights. “Scale is a benefit, but it has to translate into value for the partner funds, as he puts it.

The immediate transition has also required LPPI to expand its workforce and systems. As well as more than doubling its assets it has also increased headcount by around 25 people, including 15 former Brunel employees, after it opened an office in Bristol to serve new joiners. New systems have been introduced to provide greater oversight of investments and reporting across the expanded partnership.

The next phase is less about rapid expansion and more about establishing the appropriate long-term operating model.

A particular priority is developing a sustainable investment product range. Graham highlighted that the arrival of new partner funds has brought a much wider range of existing investment products into the pool, creating a need to determine which strategies should form part of LPPI’s longer-term offering.

That also means developing clearer measures of success across the partnership, which could include investment performance, costs, progress against liabilities and local investment objectives.

What’s next?

Following the significant expansion of the past two years, LPPI is not actively seeking another major expansion of its partner base, although its assets will continue to grow naturally as its underlying defined benefit (DB) schemes remain open.

The focus now is on making the new model work effectively. That means developing the capabilities needed by partner funds, refining the investment proposition and using the scale created by the pool to pursue opportunities that have been harder to access until now.

The result is a business that has moved beyond simply implementing the structural requirements of the reforms and is now grappling with the more fundamental question of what a larger LGPS investment business should look like.

Graham said: “The third phase is about determining what the business looks like beyond the implementation of the reforms.”

With the April 2026 pooling deadline now passed, attention is turning to the next milestones - including the March 2027 investment strategy deadline and September 2027 requirement for pools to become full-scope alternative investment fund managers.