In recent days, several local authority pension funds in the UK have announced significant new investments aimed at bolstering local businesses, showcasing a growing trend of financial support for regional growth. The Teesside Flexible Investment Fund (TFIF), a £20 million fund launched in 2024, has made its inaugural investment by providing a substantial loan to the Paralloy Group, a stainless steel alloy specialist based in Billingham, England.
The TFIF’s seven-figure loan is intended to facilitate the company's expansion, create new jobs, and cater to increasing demands from industrial markets and advancements in technology. Managed by FW Capital, which specializes in financing small and medium-sized enterprises (SMEs), TFIF offers a diverse range of funding options including property development financing, contract-related bond finance, and support for management teams looking to acquire local businesses.
Meanwhile, the Avon Pension Fund has committed £50 million to the South West Fund, an initiative managed by the Foresight Group that focuses on private equity and infrastructure investments. This investment comes as part of the fund's second closing round, following an initial cornerstone investment by the Devon Pension Fund when the fund was launched last year. The South West Fund aims to target smaller equity investments in established companies across South West England, from Cornwall to Oxfordshire, and is designed to be evergreen, providing a permanent capital pool for SMEs to make long-term plans.
Councillor Paul Crossley, chair of the Avon Pension Fund committee, emphasized the importance of this funding, stating, “There is a demand for funding for small and medium-sized companies, and investment is crucial to ensure local businesses can reach their full potential. This commitment is Avon Pension Fund’s latest local impact initiative, following our recent successful investments into renewable energy and affordable housing in the South West. We believe this fund will support the creation of high-quality, local jobs and positively impact the local economy.”
In addition to these developments, the South Yorkshire Pensions Authority has appointed FW Capital and Foresight to manage two new funds aimed at supporting SMEs in the region, identifying key funding gaps that have hindered growth. Each fund will deliver a £20 million commitment of finance to enable growing businesses to scale up and innovate.
The South Yorkshire Debt Fund, overseen by FW Capital, will provide loans of up to £2 million to assist with working capital, equipment purchases, recruitment, marketing, and product development. Meanwhile, the South Yorkshire Growth Equity Fund, managed by Foresight, will offer equity investments of up to £2 million, typically as part of larger funding rounds reaching up to £15 million.
This shift towards local authority pension funds backing the UK government’s growth agenda reflects an increasing recognition of the importance of local investment in driving national economic growth. The trend is not limited to the Teesside and South West regions; it extends across various parts of the UK.
In a related development, the Lincolnshire Pension Fund is also ramping up its investment strategy by increasing its commitment to the Border to Coast pool, which focuses on pooling assets among local government pension schemes. With £3.3 billion in assets, the Lincolnshire Pension Fund serves approximately 80,000 scheme members and is set to enhance its pooled investments significantly.
The fund plans to transfer £570 million from its multi-factor equity strategy, currently managed by Legal & General Investment Management (LGIM), into a new sub-fund managed by Border to Coast starting in mid-April 2025. This move is part of Lincolnshire's broader strategy to ensure compliance with the government’s directive to pool local government pension scheme assets by March 2026.
Additionally, Lincolnshire has made an initial commitment of £50 million to the Border to Coast pool’s UK property fund. This fund was launched in October 2024, with initial commitments totaling £1.2 billion from other regional pension funds, including Tyne and Wear, Cumbria, and South Yorkshire.
As of March 2024, a substantial £3.28 billion of the Lincolnshire Pension Fund’s assets were already pooled, positioning the fund favorably to meet the upcoming government deadline. Jo Kempton, head of the Lincolnshire Pension Fund, expressed confidence in the fund's strategy, highlighting the importance of pooling assets for efficient management and growth potential.
The recent activities of these pension funds reflect a significant shift in local authority investment strategies, emphasizing the critical role that local investments play in supporting economic development and job creation in communities across the UK. As these funds continue to mobilize resources for local businesses, they are not only fulfilling their fiduciary responsibilities but are also contributing to the broader economic landscape.
With the government pushing for increased local investment, the trend of pension funds committing capital to regional initiatives is likely to continue, potentially leading to a more robust and resilient economy in the coming years. The proactive approach taken by these pension funds signifies a commitment to fostering local enterprise and innovation, which will be essential for navigating the challenges of the post-pandemic recovery.
