Greater Manchester Pension Fund (GMPF) is the largest LGPS in the UK. The Fund is managed by Tameside Metropolitan Borough Council. The Fund has around 380,000 members and total assets were £22 billion as of 31 March 2020.
GMPF is one of the only pension funds to have an explicit allocation to local investment with the twin aims of generating a commercial return and delivering a positive local impact. This has been a consistent part of their strategy for decades: the fund first made an allocation to invest locally 25 years ago.
GMPF has built its investment capacity over time and today has 7-8 investment professionals and a pool of investment professionals who do due diligence and investment structuring. The current 5% allocation sits within ‘alternatives’ with specific allocations to private equity, private debt, infrastructure and property, including Private Rented Sector (PRS) and affordable housing.
Local investing was originally defined as the Greater Manchester region, however, this has recently been extended to the North of England. This decision is partially to enable greater diversification but also to support collaboration and pooling arrangements with Merseyside and the other Northern Pool funds.
The GMPF investment team have close working relations with the Greater Manchester Combined Authority (GMCA) and have established a governance structure and capacity to make joint local investments.
This relationship has been built up and strengthened over the past five years. The 2014 Devolution Agreement was critical to the establishment of the investment team within the Combined Authority (now 15 person strong). Central government provided a combination of grant funding which covered staff costs and risk capital which underwrote the risk of early investments. The first joint investment was GM Housing Investment Fund in which GMPF invested £100m. This invests in new Build-to-Rent and Build-for-Sale housing schemes brought to them by private developers. The fact that the GMCA can structure finance as mezzanine finance is helpful in leveraging in pension fund investment.
Both the GMPF and GMCA investment teams are driven by market opportunities that meet their risk and return profile. The regional economic development strategy is implicit in what they do. GMPF actively seeks out opportunities that deliver a positive impact. It was a founding investor in the Invest 4 Growth initiative established in 2014 with a number of other LGPS funds. A total of £50 million was raised and invested in SME and impact focused funds UK-wide but with some investments having a local impact, including investments in Bridges venture, property and social impact bond funds.
Following on from the Invest 4 Growth initiative, GMPF has approved an allocation of up to 2% into an Impact Portfolio. This portfolio has the same twin aims of generating a commercial return and delivering a positive local impact. GMPF is seeking to collaborate with other pension funds, specifically the Northern Pool members, to develop a diversified portfolio and achieve cost benefits from greater economies of scale. Investments include Mercia’s SME Loan Fund and most recently a £10 million investment in Resonance’s National Homelessness Property Fund 2. GMPF negotiates side car vehicles with fund managers to ring fence their investment to the local area. GMPF also makes direct investments in regeneration and property development schemes through joint ventures. The Fund’s flagship development is 1 St Peter’s Square which is seen as a catalyst for further development and regeneration in Manchester.
Neither GMPF or GMCA have a systematic approach to impact measurement, management and reporting. They have evidence that their local investments have created improvements to the local economy, including business development, job creation and provision of affordable housing. Both are interested in our initiative to develop a common impact reporting framework and will participate in the working group. GMPF believe that diversification is important to reduce volatility of the overall Fund return, and that local investments have provided such benefits.