Five London boroughs' pension schemes opt for £250m alternative credit exposure

By Daniel Lanyon on 29th March 2018

The search for fund managers has begun for the pension schemes of some of London’s largest boroughs.

Five London boroughs' pension schemes opt for £250m alternative credit exposure

Five London Boroughs – Ealing, Havering, Lambeth, Wandsworth and Merton are looking to the private debt market to boost their pension portfolios’ income and improve diversification.

All five boroughs are part of the London Pension Collective Investment Vehicle (London CIV) pool, which has not yet launched a private debt investment programme but will, having been advised by specialist investment consultant bfinance as to manger selection.

Bfinance is conducting the manager search and selection while JLT Employee Benefits is working with the five boroughs and bfinance on the design of the mandate.

The investment size is currently expected to be £250m, however this may increase if additional London boroughs opt for exposure to private debt also. The five boroughs have total assets under management of approximately £4.5bn, meaning that the new private debt investment will represent around 5 per cent of their combined portfolios. 

Improving yields and achieving stronger risk-adjusted returns are among the key priorities for the LGPS Funds, and this has led to an increased interest in private debt, which is set to continue in 2018.

Bridget Uku, Group Manager Treasury & Investments at the London Borough of Ealing Pension Fund, says the key drivers for the borough investing in private debt is to diversify returns and increase exposure to assets that derive that majority of their returns from income as opposed to capital growth.

“The Fund has benefited from its sizeable equity exposure and on the back of these strong returns it agreed to reduce this exposure and use the proceeds to invest into an asset class where the expected total returns still look attractive relative to many other asset classes,” she added.

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