LPFA selects Apollo for £150m debt mandate

All 99 members of the Local Government Pension Scheme can appoint any of the four shortlisted managers under a newly created framework.

London Pensions Fund Authority (LPFA) has opted for Apollo Capital Management to manage its £150 million (€207.7 million; $232.4 million) private debt mandate, including real estate debt, out of four possible candidates.

It is understood the mandate will target an absolute return, net of fees, of between 10 and 15 percent.

The £4.8 billion pension fund manager also announced a credit manager framework that allows other Local Government Pension Schemes (LGPS) to select from four shortlisted alternative credit managers.

On the shortlist are Apollo, Ares Management, Babson Capital and GSO Capital. The new framework will remain operational until February 2019.

Apollo has been chosen to oversee LPFA’s allocation to alternative credit including distressed debt, real estate debt, leveraged senior loans and private lending, subject to final documentation.

The mandate will be unconstrained and target absolute returns by investing across a number of higher yielding debt markets, LPFA said in a statement. It is expected that the majority of investments will be made within developed markets but there will be scope too for allocations to emerging markets.

Within the new framework all 99 of Britain’s local authority pension fund plans affiliated via LGPS and overseeing roughly £180 billion (€249.2 billion; $267.4 billion) can appoint any of the four managers to a segregated private debt account over the next three years. To create the framework, LPFA ran a full European tender process, required under EU law when public authorities seek to appoint a third party to manage a service on their behalf. The tender process is not required when investing in a pooled fund.

LPFA shortlisted the four managers from around 35 applicants in March, and was considering appointing one or more of the managers to invest between £100 million and £150 million in private debt. The final four were chosen because of the vertical credit strategies they offer, Chris Rule, chief investment officer at LPFA, previously said.