The new prime minister has put devolution at the heart of his government’s economic agenda. But stronger regional institutions alone will not unlock institutional investment. The real test is whether they can create a pipeline of commercially attractive opportunities.
When Andy Burnham entered Downing Street with a pledge to spread “good growth in every postcode”, he placed devolution at the heart of his government’s economic strategy.
The English Devolution and Community Empowerment Act 2026 has already laid much of the legislative groundwork, creating a unified framework for Strategic Authorities with greater responsibility for transport, planning, housing, skills and economic development.
Whether this agenda succeeds politically remains to be seen. For institutional investors, success will not be judged by which powers have been transferred from Whitehall, but whether devolved institutions can create an attractive pipeline of long-term investment opportunities.
Despite years of discussion around place-based investing, relatively little capital has flowed into regional projects. This may change with the authorities empowered to develop, structure and deliver opportunities in a way that satisfies institutional expectations around governance, scale and risk-adjusted returns.
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To explore this potential, Private Markets Profile spoke to investors, fund managers and public sector practitioners working across the investment ecosystem. Each approaches the issue from a different position, from building investment markets and structuring funds to allocating pension capital and delivering local regeneration. They offer a practical view of what devolution must achieve if it is to change the way institutional capital is deployed.
Creating opportunities
The 2026 Act establishes a stronger framework for regional decision-making, turning place-based social needs into investable opportunities.
Developing impact investment markets is a challenge that Better Society Capital has been tackling for 14 years, bringing together public, private and philanthropic capital. From CIO Anna Shiel’s perspective, the legislation creates an opportunity to strengthen investment networks around Strategic Authorities.
“It creates a moment and an opportunity to intentionally build a whole ecosystem around how we invest locally,” she says. “It is building on what people have been trying to do, the infrastructure they’ve been building… the examples, case studies and precedents that already exist. That’s what makes it particularly powerful.”
It’s about building long term partnerships to create that pipeline.
Anna Shiel, Better Society Capital
Shiel sees it as creating the conditions for stronger long-term partnerships between local authorities, investors and other stakeholders. “It’s about having the ability to shape a long-term vision for what you want to achieve in a particular area,” she says.
“There is also a convening power… the ability to bring together the different players in the system that are needed. That means you can start to harness both the resources that the public sector can bring… together with longer-term partnerships with the private sector.”
She is equally clear, however, that stronger regional institutions will not immediately overcome one of the biggest frustrations facing institutional investors.
“I don’t think it immediately solves the problem,” she says. “The [investment] pipeline gets fixed over time. It’s about building long-term partnerships to create that pipeline… where you’ve got a very good, shared understanding on both sides of what investors need… while at the same time ensuring that you’re rooted in what matters within that region or place.”
For Shiel, that means moving beyond the traditional relationship between investors and project sponsors. Instead, regional authorities have an opportunity to help “actively co-create and shape a future pipeline of investable opportunities by bringing an investment mindset into projects from the outset, rather than after schemes have already been developed”.
Structuring capital
Creating investable opportunities is only one part of the challenge; packaging them in a form that institutional investors can buy is another. The specialist impact investment manager Resonance has spent more than a decade working with local authorities, combined authorities and LGPS funds to structure place-based investment vehicles.
CIO Simon Chisholm says the difficulty is in combining worthwhile projects into a form and scale attractive to institutional investors. “Momentum has been building towards place-based investment regardless of the Act,” he says. “The Act is, to me, the latest stage in that development… rather than a complete game changer.”
He believes the greater challenge is connecting institutional capital with genuine local need. “Tying genuine institutional investment into real grassroots local need… has been the conundrum,” he says.
Tying genuine institutional investment into real grassroots local need… has been the conundrum.
Simon Chisholm, Resonance
Many worthwhile projects, he explains, remain too small to attract institutional investors directly. “Sometimes projects are very small. They need to be aggregated… We buy individual residential property units… and aggregate those into funds which are of a scale that can be addressed by institutional investment.”
Chisholm also argues that fund structures can also reconcile investors’ need for diversification with their wish to attract capital into their own communities. Resonance’s homelessness property strategy, for example, provides exposure to a nationally diversified portfolio while local authorities can still direct capital into their own region through side agreements. He describes this as “the best of both worlds”.
Building ecosystems
For Northern Gritstone, the investment company established to commercialise research from the universities of Manchester, Leeds and Sheffield, the decision-making process starts with the fundamental question. What makes a regional economy investable?
Duncan Johnson, chief executive of Gritstone, works closely with several mayoral authorities, three of which are investors in the business, giving him a close view of how devolution is evolving in practice. Overall, he welcomes the direction of travel but cautions against treating the latest reforms as a watershed.
“A lot of this has been going on for a period of time,” he says. “The mayoral piece is just the next stage… I don’t see it as a revolution, I see it more as evolution.”
For Johnson, success is built over decades rather than parliamentary terms. He points to the timely example of Greater Manchester, whose former mayor is now seeking to apply the same principles nationally, as an illustration of combining political leadership with long-term investment in universities, businesses and infrastructure. “The ecosystem around Manchester is very mature,” he says, noting it has been developed over more than two decades.
Manchester has become the model that other regions look towards. “Everybody else really looks at that and says, ‘which bits of that can I beg, borrow and steal?’ You don’t have to reinvent the wheel.”
Rather than attempting to replicate the Manchester model across England, Johnson believes regions should build on their existing strengths. “Every place has different competitive advantages. The trick is to identify what you’re already good at and build on that rather than trying to become something else,” he says.
“The two fastest centres in the UK for AI start-up growth are Manchester and Leeds. You have to see what you’ve got and accelerate it… Be greedy where you see good things happening, and make sure they happen very, very well.”
The trick is to identify what you’re already good at and build on that.
Duncan Johnson, Northern Gritstone
However, the talent that underpins Manchester is “really the game changer”, he says. “If you can get quality people involved… you can really move forward.”
He draws comparisons with Kendall Square in Cambridge, Massachusetts, where sustained investment over several decades created one of the world’s leading innovation clusters based on MIT research and venture capital funded tech companies. He also notes how long this has taken: “It’s not five years on or 15 years on – it’s 50 years on.”
This gives talented people the security to commit to innovative start-up companies. “They’ve created a low-risk environment to have a high-risk job.”
Johnson believes that this principle could apply to building an enduring defence ecosystem. He notes that US Cold War spending helped create the world’s leading innovation cluster and Britain could create a similar legacy. “Silicon Valley was based on Pentagon Cold War investment in the 50s and 60s – that was its bedrock.”
For Johnson, the role of government is to create the conditions in which private investment wants to participate by supporting talent, research, infrastructure and long-term industrial strategy. Successful regions, he argues, emerge from strong partnerships rather than public funding alone.
He adds that devolution means regions ultimately need to accept responsibility for their successes – as well as their failures. “If capital is not coming to you, the market is telling you you’re not good enough.”
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Investing locally
The emphasis on regional ecosystems resonates with Peter Wallach, head of the Merseyside Pension Fund, although he approaches the question from a very different perspective.
As one of the UK’s largest LGPS funds, Merseyside has been investing in place-based opportunities for a decade. For Wallach, the debate is less about whether pension funds should invest locally than about identifying local opportunities that satisfy the same commercial discipline that is applied to any other investment.
“We’ve been doing this since 2016,” he says, pointing to the fund’s Catalyst Fund, which was established to support regeneration and economic development across the Liverpool City region.
That experience has reinforced an important lesson. “Ultimately, if you’re investing pension money, it has to be a good investment,” Wallach says. “Social impact is important, but it can’t come at the expense of delivering returns for members.”That principle shapes the way the fund approaches place-based investment. Almost inevitably, local investment brings increased financial and reputational risk. Within that context, rather than treating local investment as a separate asset class, Wallach looks for opportunities that satisfy the same commercial and risk standards as any other private market investment while also supporting regional growth.
In practice, that has often meant favouring assets capable of generating predictable long-term cashflows, including housing, regeneration projects and district heating schemes. Debt structures can also be attractive because they provide greater downside protection while still helping to deliver local infrastructure.
Wallach believes that approach can be applied to a much wider range of opportunities as regional economies develop. Merseyside already backs Northern Gritstone because of its focus on commercialising research from northern universities, illustrating how pension funds can support regional innovation without compromising investment discipline.
Ultimately, if you’re investing pension money, it has to be a good investment.”
Peter Wallach, Merseyside Pension Scheme
“The three Northern funds are already backing university spin-outs. We back Northern Gritstone, that’s our principal [example] because it’s focused on the four northern universities and therefore fits the local billing,” he says.
Looking ahead, he sees opportunities emerging across housing, social infrastructure and renewable energy, while transport infrastructure could become another important area if projects are structured appropriately. The financing of cleaner bus fleets, for example, could provide institutional investors with another route into long-term infrastructure.
“Manchester is refranchising its buses and looking to make them electric… the financing for those kinds of projects could well come from the pension funds if the opportunities stack up.”
Such projects, he believes, provide pension funds with opportunities to invest close to home without compromising their fiduciary responsibilities.
While Peter Wallach explains what pension funds are prepared to invest in, Westminster City’s Patrick Rowe spends his time thinking about how local authorities can bring those opportunities to market (see box).
The new prime minister has made devolution his defining political project and the 2026 Act has already laid the foundations with a new institutional framework. But whether this all becomes a catalyst for greater private investment will depend less on constitutional change than on execution.
For institutional investors, the measure of success will be whether they produce a pipeline of opportunities, build the partnerships needed to deliver them and demonstrate that regional growth can compete for capital on purely commercial terms.
CASE STUDY:
Westminster City Council
Patrick Rowe, Strategic Finance Manager – Treasury & Pensions at Westminster City Council, argues that developing projects that institutional investors are able to back will be the key to successful devolution.
Speaking from his dual perspective across both treasury management and the council’s pension arrangements, Rowe believes local authorities need to demonstrate that they are credible long-term partners capable of bringing forward well-structured investment opportunities.
The first thing we have to demonstrate is that we’re serious
Patrick Rowe, Westminster City Council
“The first thing we have to demonstrate is that we’re serious,” he says, arguing that investors need confidence that projects are “credible plans that are well thought through”. This means them being supported by clear governance, realistic delivery plans and long-term political commitment.
That means thinking about investment opportunities from the outset rather than seeking funding once projects have already been designed. Rowe argues that local authorities need to understand the requirements of institutional investors, including the need for predictable revenue streams, appropriate risk allocation and investment structures that can accommodate long-term capital.
One example is London Edge, a partnership designed to unlock investment into employment space for small and growing businesses. Rather than relying solely on public funding, the model seeks to combine public-sector priorities with institutional capital by creating assets capable of delivering sustainable commercial returns alongside wider economic benefits. For Rowe, initiatives such as London Edge demonstrate how councils can move beyond simply identifying regeneration projects and begin shaping opportunities around the requirements of long-term investors.
Westminster has also explored the use of blended finance, where public and private capital play complementary roles. Rather than expecting pension funds to absorb development risk, the objective is to create projects whose financial characteristics are aligned with institutional investment requirements.
Collaboration is central to that approach. Local authorities, developers, fund managers and investors all bring different priorities, and engaging with potential investors while projects are still being designed increases the likelihood that schemes will ultimately attract long-term capital.
For Rowe, devolution will ultimately be judged less by the powers transferred to local authorities than by their ability to convert local ambitions into investment opportunities that institutional investors recognise, understand and are willing to fund.