The £23bn West Midlands Pension Fund plans to invest up to 3% to 5% of assets, about £1.1bn, into ‘local’ opportunities in the next six to eight years via its asset pool LGPS Central if suitable opportunities are found. 

West Midlands Pension Fund’s Investment Strategy Statement, which includes the new target for local investments, was approved earlier this month, ahead of a new legal requirement. The 2026 draft regulations for the Local Government Pension Scheme require funds’ ISS to set out a target range for local investments, having regard to the local economic priorities of the strategic authority.  

“This is a clear, long-term target for local investment as part of our investment strategy statement.  It is grounded in fiduciary duty and informed by advice and evidence,” said the fund’s executive director of pensions, Rachel Brothwood.   

The planned local investments are contingent on there being opportunities that meet the fund’s risk, return and governance requirements. “Every opportunity will be assessed against the same standards we apply across the whole portfolio, including risk, return, due diligence, and governance,” Brothwood said. 

As required by the incoming legislation, the pension fund will work with its strategic authority, West Midlands Combined Authority, having regard to their growth plan and priorities.  

“Working with WMCA will help strengthen the pipeline of investable opportunities, but the fund and our pooling partner will always make independent investment decisions in line with our fiduciary duty to members and employers,” Brothwood noted.  

Labour cllr Milkinder Jaspal, who chairs Wolverhampton's pensions committee, stressed that its responsibility is to deliver sustainable returns for members and employers. He said: “This £1.1bn allocation sits firmly within our Investment Strategy Statement. It reflects our confidence in the region, but every investment will be assessed against the same rigorous criteria for risk, return and governance that apply across our portfolio.” 

The fund and authority will sign a memorandum of understanding to form the basis for the joint work. 

West Midlands mayor Richard Parker (Lab) said: “The fund has an obligation to protect its members’ money and deliver best value for them, so this commitment really is testament to our region’s strength as an investment prospect.” 

The fund's primary geographical focus for the local allocation is the West Midlands Combined Authority, as well as investments that have an economic, social or environmental link to the region. It will consider assets that sit just outside this area if they are connected to West Midlands outcomes or supply chains, according to the fund. 

In addition, the fund’s documents suggest it will also consider investments outside the broader Midlands “where a pool-wide or national approach provides adequate scale or diversification benefits”. 

The ‘up to’ target will flow primarily into private markets, such as housing and real estate, infrastructure and business financing. The fund does not have a list, as it expects to respond flexibly to opportunities.

Noting “the elevated risk and complexity of this portfolio”, the ISS states that opportunities will be jointly reviewed by the fund, West Midlands Combined Authority and the pool company, and that screening will consider factors such as risk return characteristics, potential for impact, locality, responsible investment integration, and fit within the fund’s existing local investment exposure.   

LGPS Central will conduct the detailed due diligence of any opportunities that progress through this first stage and make the final investment decision, while the fund maintains active oversight and challenges LGPS Central on investment performance, progress against milestones and delivery of expected place‑based benefits. 

Other changes in the new ISS include slightly higher targets for gilts and credit, and a lower allocation to listed equity, down to 29%. There are no changes in the targets for private equity (6%), private debt (7%), infrastructure (9%) and property (9%).