Unconsolidated investment management can be inefficient, costly, and challenging for institutional pension plans to monitor.
Consolidation alone cannot solve the core problem if the implementation remains a collection of overlapping active mandates.
Investors need an implementation model that makes total portfolios easier to understand, to manage, and to control.
An age old characteristic of Institutional pension portfolios has been how they can evolve over time into complex, multi-manager structures that are increasingly difficult to govern, costly to operate, and often fail to deliver differentiated outcomes at the total-portfolio level.
This complexity is not driven by poor decisions, but by the accumulation of mandates, styles, and governance layers. The result is that pension funds frequently face implementation challenges rather than investment idea shortages, leading to reduced transparency, higher costs, and portfolios that behave more like benchmarks than intended.
The UK policy backdrop—through the Mansion House reforms and Local Government Pension Scheme (LGPS) pooling—aims to address fragmentation by driving scale, improving governance, and enhancing cost discipline. However, scale alone does not guarantee better outcomes. The effectiveness of pooling depends critically on how portfolios are implemented, governed, and managed at the total-fund level.
This is the moment we observe the LGPS to be at a historic inflection point. As the pools consolidate assets, they have a significant opportunity to genuinely make scale matter, future proof portfolios and secure generational better outcomes at a total portfolio level that may not arise in the same way ever again.
This paper identifies four interlinked challenges common across institutional portfolios which the LGPS can take stock from:
The core insight is that the problem is not active management per se, but uncoordinated implementation. Multi-manager portfolios can appear diversified but can lack intentional total-portfolio construction, resulting in inefficient use of risk and capital.
To address this, the paper argues for a shift away from traditional manager-by-manager allocation toward:
Systematic multi-factor strategies are presented as a practical solution, offering:
Pooling and consolidation create the opportunity—but not the solution. Better outcomes will depend on moving from fragmented manager structures to deliberate, integrated portfolio construction, where scale is matched with disciplined implementation, clear governance, and targeted sources of return.
The Invesco Quantitative Strategies (IQS) team uses state-of-the-art technology and data-driven insights to identify the most up-to-date investment opportunities for our clients. The goal: the development of first-class systematic equity solutions. With decades of experience and in-depth research skills, the team focuses on innovative portfolio constructions and multi-factor strategies. The team manages over $50 billion in assets and has a large and experienced team of more than 50 investment professionals.
The study provides unique insights into the investment objectives and behaviours of sovereign investors and central banks. This year, we surveyed 144 senior investment professionals from 90 sovereign funds and 54 central banks, who collectively manage approximately US$29 trillion in assets.
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