LGPS fund professionals cite rising inflation as their biggest concern

More than half (58 per cent) of Local Government Pension Scheme (LGPS) fund professionals said inflation is their fund’s biggest worry, new research from Alpha Real Capital has revealed.

This research comes after the inflation figures for April 2022 came in at 9 per cent for CPI and 11.1 per cent for RPI.

Alpha Real Capital stated, in light of high inflation prints in recent months and the survey results, managing inflation risk would be top of mind for LGPS funds, especially this year as March 2022 is the date for triennial valuations and a trigger for reviewing investment strategy.

The research also discovered other concerns for LGPS fund professionals, as 19 per cent cited longevity as their biggest worry, 14 per cent said affordability of future accrual was their main concern and 9 per cent cited geopolitics.

More than half (53 per cent) of respondents said the target for their investment portfolio post-valuation would be an inflation + (CPI +) target while 47 per cent cited gilts + as their benchmark.

Alpha Real Capital head of client solutions, Boris Mikhailov, commented: “Out of all institutional investors LGPS funds are arguably best positioned to make the most out of secure income assets.

“This is because they can take a truly long-term view when investing. There is no buyout ‘endgame’ with insurers.

“So, unlike many corporate DB schemes that shy away from investing in illiquid assets or feel a need to reduce their holdings if buyout is on the horizon, LGPS funds can hold these assets for the long-term.”

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