The £8.4bn (€9.2bn) pension fund for the county of Lancashire was the stand-out performer across the UK’s Local Government Pension Scheme (LGPS) in the 12 months to 31 March 2019, according to data from PIRC.

An analysis of 64 LGPS funds from across England, Wales and Scotland showed Lancashire gained 11.7% in the 2018-19 financial year, ahead of the £1.2bn scheme for the London borough of Kensington & Chelsea, which gained 10.9%.

Both schemes were aided by strong equity performance, with Lancashire posting the top equity return across PIRC’s sample, with 16%. Kensington & Chelsea’s equity allocation gained 12.9%.

At the other end of the performance spectrum, the £733m Havering Pension Scheme – also linked to a London borough – reported a 3.4% return. Its performance was negatively affected by a 1.4% loss incurred on its allocation to diversified growth strategies. Four other London funds posted returns of between 4.3% and 4.9%.

The biggest fund in the LGPS, the £23.8bn Greater Manchester Pension Fund, performed below the median return for PIRC’s sample with a 5.6% gain, compared to the 6.2% average.

Within asset classes, PIRC’s data showed that alternatives allocations performed particularly strongly across the LGPS. Islington’s £1.4bn scheme reported a 35.6% return from its alternatives portfolio, which was predominantly allocated to infrastructure, according to council documents.

The £2bn pension fund for Gwynedd in north Wales reported a 24.8% return from its alternatives holdings, which included private equity and infrastructure allocations.

The West Yorkshire Pension Fund posted the best returns from property, adding 13.3% for the year. The pension funds for Southwark, Surrey and Newham all also reported double-digit property returns.

Long-term performance

PIRC’s data also revealed LGPS funds’ longer-term performance, with figures covering five, 10, 20 and 30 years to 31 March 2019. 

Over 10 years, the London borough of Bromley’s £1bn scheme added 13.7% a year on average, the best of any of the LGPS funds analysed by PIRC.

Bromley was closely followed by Scotland’s Orkney Islands Council Pension Fund, which has returned 13.4% a year over the same period. At £391m it is the smallest fund within the LGPS system.

The two funds also led the way over 20- and 30-year periods.

Asset allocation

PIRC’s numbers showed little year-on-year change in asset allocation across the 64-fund sample, with the exception of a slight increase in fixed income holdings and decrease in diversified growth strategies.

LGPS funds held an average of 55% in equities and 19% in bonds as of 31 March, the data showed. They allocated 11% to alternatives and 9% to property, on average.

At the end of March 2019, there were 100 funds across the UK’s LGPS system with £347.1bn in assets under management, an increase of 6.3% compared to 31 March 2018, according to data compiled by IPE.