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UK pension funds form £1.2bn RE investment pool

The London Pension Fund Authority (LPFA) and the Lancashire County Pension Fund (LCPF) will combine their assets after instruction from former British Chancellor George Osborne.

Two local government pension funds are creating a £1.2 billion ($1.6 billion; €1.4 billion) ‘superpool’ of capital which is to be invested in real estate.

The Local Pensions Partnership (LPP) will combine the existing core property allocations belonging to the London Pension Fund Authority (LPFA) and the Lancashire County Pension Fund (LCPF). The two pension funds will jointly own the asset management vehicle.

The pool will combine £300 million from the LPFA with an existing £550 million provided by LCPF. Knight Frank Investment Management (KFIM), the real estate investment management firm of London-based property services firm Knight Frank will, according to an LPP spokesman, “source, execute and manage” investment opportunities in the UK commercial and residential property space

The KFIM mandate will be combined with an existing allocation of £260 million for specialist income and value-add strategies, including student accommodation and senior housing.

Last year, former Chancellor George Osborne urged local government pension funds to consolidate their assets to encourage funds to invest in large-scale infrastructure projects.

Chris Rule, LPP co-chief investment officer, said: “This allocation extends further the strategic partnership between LCPF and LPFA through the Local Pensions Partnership. We’re pleased to not only be talking about collaboration and pooling across the LGPS, but actively engaging in it.”

The new LPP property pool allocation will take KFIM’s assets under management to in excess of £1.75 billion.

John Styles, head of fund management at KFIM, said: “We look forward to building on our track record of exceeding LCPF’s target returns by investment and active asset management of core UK properties in the LPP property pool. We are also excited at the prospect of partnering with developers and managers to access specialist sectors and value add opportunities for the fund,” he added.