Investment regulations and limits for UK local government pension schemes (LGPS) should be more akin to those in the private sector, according to the Greater Manchester Pension Fund (GMPF).
The £13.2bn (€18.1bn) pension fund provides pensions for around 286,000 current and former public sector workers in Northwest England, the largest LGPS in England and Wales.
Speaking in IPE magazine’s On The Record for April, Peter Morris, director of pensions at the scheme, said the current set of investment regulations for LGPS could be too prescriptive.
“By comparison, private sector pension scheme investment regulations are set up on the basis of a prudential framework,” Morris said.
“A similar approach would be an appropriate basis on which to design new LGPS investment regulations.”
However, Morris – despite his call for a more relaxed framework for LGPS investments – acknowledged the GMPF had not been constrained by the requirements, and praised the relaxation for investment in alternatives in 2013.
He said the 30% cap, raised from 10%, gave the fund a lot more scope to invest in alternatives, particularly infrastructure.
“In the past, there was not a great deal of headroom for an upward increase in strategic allocation to private equity and infrastructure investments through limited partnerships,” Morris said.
“There are [still] a number of potential investments that might be appropriate for an LGPS fund but are not permitted under the regulations because of the way they are drafted.
“However, an alternative approach can generally be found.”
GMPF recently unveiled a £500m infrastructure and alternatives vehicle together with the London Pension Fund Authority (LPFA), allowing both schemes to scale up.
The fund is currently £260m below its target allocation to alternatives and will now contribute £250m to the new vehicle.
Morris also said the requirement for LGPS funds to obtain “proper advice” remained a crucial component, and ensured prudent investment decision-making.
He said the GMPF’s structure and size meant it was well placed to provide cost-effective advice to its own board and other schemes.
“GMPF has the particular advantage of scale, which allows us to build up significant internal expertise that can provide cost-effective advice both to our scheme, and potentially other funds in the LGPS,” he said.