Straightforward to operate, low cost, a segregation option, tax transparent and exempt, the Reserved Investor Fund (RIF) has many attractions for local government pension scheme (LGPS) pools. Operating as an onshore fund for pension schemes and other institutional investors (UK and international), the first RIF was launched in July this year and has been well profiled.
But the RIF has some key attractions for LGPS pools specifically. As an unauthorised contractual scheme, it can provide a flexible and scalable structure for LGPS pool partner funds, which are UK tax-exempt investors. LGPS pools can use the RIF to accommodate for the partner funds a broad range of private market investments, not just UK real estate.
The RIF also has flexibility on investor exits: closed, open-ended, hybrid or evergreen. The context is that LGPS funds collectively hold approximately £95bn (€113bn) of private market assets – representing around 24% of their total assets – and so represent one of the largest institutional allocators to private markets in Europe.
Here are the main benefits of a RIF LGPS pool solution:
Unconstrained assets
Underlying investments are unconstrained, so can include private equity, infrastructure, private credit, real estate and other long-term, less liquid asset classes.
Whilst the authorised contractual scheme (ACS) has served the LGPS pooling agenda well as the vehicle of choice of listed and liquid portfolios, it is not naturally suited to the delivery of private fund (including place-based investment) strategies characterised by less liquid assets, development risk, joint ventures and bespoke local projects.
Given the similarities between the ACS and the RIF – both being contractual schemes and investors beneficial owners – I advocate the RIF as the natural complement to the ACS for LGPS private market strategies.
Whilst the ACS is understandably the pooling vehicle of choice for listed and liquid strategies, the RIF should be considered as the primary private-markets platform where an unauthorised, flexible and lower-cost structure is appropriate.
Lower cost
The RIF has benefits as an unauthorised fund. Compared with an ACS, it is more lightly regulated and, importantly, may offer lower establishment and operating costs, often assessed via the total expense ratio (TER) benchmark. The lower the TER, the greater the return for LGPS pool partner funds. In the pursuit of better partner fund outcomes, LGPS pool finance officials should therefore include a RIF TER assessment when evaluating private fund structure solutions.
It is not surprising that, prior to the 2025 RIF legislation being implemented, the pools used other unauthorised fund structures. For instance, London CIV has unauthorised exempt unit trust (EUUT) and limited partnership (LP) structures for its private fund strategy.
Those structures are established and familiar alternatives, but the RIF now provides an additional and attractive option which should be assessed against them on cost, governance, tax, flexibility and operational efficiency.
Segregation of assets
Partner funds can invest via the RIF umbrella and/or segregated sub-scheme levels. This is a distinctive feature for an unauthorised fund and, I suggest, a key reason why the RIF should be considered for LGPS pool private fund strategies going forward in preference to the EUUT and LP.
As an umbrella structure with segregated sub-schemes, the RIF can facilitate the separation of regional and thematic investment sleeves, enhanced where appropriate by project specific sub-schemes and joint ventures. This can utilise the geographical proximity and common interests of partner funds, facilitating LGPS capital efficiently financing local housing, regeneration, infrastructure, energy transition and productive finance opportunities.
It may also avoid a proliferation of numerous LPs and other entities to accommodate different asset classes and strategies.
Each sub-scheme commitment via a RIF sub-scheme deed can be carefully structured to provide for investor protections, including governance, legal and economic segregation between strategies. As examples, Border to Coast ACS9 and LPPI Asset Pooling ACS10 have adopted the sub-scheme – a concept that can easily be replicated for the RIF.
Operational efficiency
Compared with the EUUT and the LP, the RIF can have greater operational efficiency. For example, the RIF is not subject to EUUT deemed distribution rules, or LP partners holding a share in the LP property for UK capital gains tax purposes, which can create administrative and compliance burdens for managers and investors. As indicated above, neither the EUUT nor LP can operate as an umbrella structure with segregated sub-schemes.
By aggregating capital within a single RIF platform, LGPS pools advance the pooling strategic vision: achieve substantial economies of scale, reduce duplication of investment infrastructure, improve access to specialist opportunities and support deployment of capital into local investment projects.
At the same time, the structure preserves investment discipline, diversification and risk management, ensuring that local investment objectives remain aligned with LGPS partner funds’ long-term financial interests. The partner funds can then be liberated from constraints such as small deal sizes, concentration risk, limited internal resource, governance burdens and the challenges of accessing specialist expertise.
Any local or place-based investment would need to be assessed primarily on investment grounds, consistent with each partner fund’s fiduciary duties, investment strategy, diversification requirements and risk-adjusted return objectives. The RIF structure can support, not displace, those fiduciary and governance responsibilities.
Tax transparency and exemption
The RIF adopts the ACS tax features: tax-transparent for income and tax-exempt for capital gains (although, of course, LGPS funds enjoy UK tax exempt status). For England and Northern Ireland, there is a stamp tax exemption when a purchaser acquires RIF units as well as stamp duty land tax seeding relief. Industry stakeholders are campaigning the Scottish and Welsh governments to legislate for equivalent land and buildings transaction tax (LBTT) and land transaction tax treatment. The Scottish government has helpfully consulted on LBTT equivalence for the RIF.
The practicalities for establishing and operating LGPS Pool RIFs are straightforward. The partner funds commit via a deed also involving the following:
- An alternative investment fund manager (AIFM). Under the Pension Schemes Act 2026 framework, LGPS pool companies are intended to become FCA-regulated investment management entities responsible for managing LGPS partner fund assets, which positions each pool to operate as an AIFM.
- A depositary, providing the applicable safekeeping, cash-monitoring and oversight functions and an additional governance safeguard.
The RIF also has a speed-to-market dynamic. As an unauthorised fund, there is no need to apply to, and obtain approval from, the FCA before launch, nor make applications to the FCA for future fund amendments.
Reassuringly, some pools are already discussing with me the RIF, including to enable partner funds to access local investment opportunities through a private markets platform. Fund structure solutions – in the context of the UK government’s objectives for LGPS pooling – should support scale, lower costs, enhanced governance, efficient access to productive assets and improved net returns. I urge all pools and their partner funds to consider the RIF opportunity.
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