Nadeem Hussain, LGPS Central’s co-CIO head of private markets, tells Aysha Gilmore about the pool’s plans to expand its local and natural capital investment strategies.
“One of our priorities in the new year will be to develop a comprehensive local investment strategy, enabling us to support businesses across multiple asset classes – not only by providing equity but also extending debt,” says Nadeem Hussain, co-CIO and head of private markets at LGPS Central.
The UK Local Government Pension Scheme (LGPS) pool, which manages more than £43bn of assets for its eight partner funds, currently has £6bn allocated to private markets, with £2.9bn deployed to date.
LGPS Central’s private markets offering covers four asset classes: infrastructure, private credit, property and private equity.
Hussain highlights that around a quarter of LGPS Central’s private markets portfolio is committed to UK investments, but notes that investment in the local region and wider UK will be “a significant growth area in 2025”.
“This outlook is partly informed by government direction,” he says. “There is clear interest. While we’ve already done a considerable amount in the local region and across the UK, there remains scope to do much more.”
Hussain’s comments come as UK chancellor Rachel Reeves revealed plans to establish “a handful of LGPS megafunds” in November to help drive investment into UK businesses and infrastructure.
Alongside this, the government has also imposed a deadline for all LGPS assets to be pooled into FCA-regulated structures by 31 March 2026. Overall, LGPS Central’s eight partner funds have collective assets of approximately £61bn.
It’s essential to be diligent about the managers and partners we collaborate with, especially as venture capital has yet to become as institutionalised as other asset classes – Nadeem Hussain, LGPS Central.
Natural capital opportunities
Natural capital is another key area of focus for LGPS Central. “This is something we may look to launch in the new year,” Hussain says, noting particular interest in timberland and agriculture.
“These are established asset classes for institutional investors like us, and timberland and agriculture would form our initial focus.”
When asked about the role of carbon credits in these investments, Hussain explains that while the pool could benefit from such credits, they would not be “the primary driver for investing in timberland”.
“Carbon credits would be an additional lever to enhance returns. But our main objective with natural capital is to achieve stable, inflation-linked, long-term returns. At the same time, we want to support the climate transition, ESG objectives, and sustainable development,” he explains.
Cautious steps into venture
While the pool’s natural capital offerings are set to grow, LGPS Central remains cautious about venture capital, with low appetite from its partner funds, Hussain says.
“We don’t have any significant plans for extensive venture capital activity, although there may be selective opportunities in the future,” Hussain says. “Venture capital lies at the higher-risk end of the spectrum for us. It’s essential to be diligent about the managers and partners we collaborate with, especially as venture capital has yet to become as institutionalised as other asset classes.”
Hussain adds that mechanisms to mitigate risk, such as co-investment with government or other institutional investors, could make venture capital more appealing.
“Our preference – and where we’ve seen success recently – is in the growth equity space, where some of the very early-stage higher risks have already been mitigated. This approach provides us with greater comfort.”
Growth in private credit
Overall, private markets commitments from LGPS Central’s partner funds have grown in recent years, particularly in private credit.
“The growth reflects a broader global shift among institutional investors—from public to private markets,” Hussain says. “Private markets often offer the potential for higher returns compared to public markets, and more bespoke portfolio objectives to be achieved to be created which is driving this transition.”
Private credit has been a notable area of expansion for the pool. LGPS Central launched its first private credit fund in 2021, raising £2.5bn over 18 months. Since then, the pool has launched two additional vintages focusing on direct lending and real asset debt.
“Private credit has experienced significant growth over the past five years, particularly in the US,” Hussain explains. “This expansion has been influenced by factors such as the recent macroeconomic conditions such as elevated inflation and higher interest rates, which have enhanced the attractiveness of private credit as an asset class.”
Hussain predicts the short-term trend towards private credit will continue, though the changing macroeconomic environment may moderate returns.
“As inflation and interest rates begin to decline, returns in private credit are also likely to moderate,” he says.
Despite this, Hussain remains optimistic about the role of private credit in LGPS Central’s portfolio.
“Historically, our partner funds have had relatively modest allocations to private capital. Over time, we’ve seen their strategic allocations increase. While future growth may not match the pace of recent years, we anticipate maintaining the current level of commitment,” Hussain concludes.