UK - The Avon Pension Fund will invest through the secondary market to gain access to real estate funds via its recently-appointed global property investment manager.
The local authority pension scheme appointed Partners Group 12 months ago to assemble a bespoke global non-listed property portfolio, and the Switzerland-based asset manager has now completed the implementation of the £90m (€100m) mandate.
As part of the global strategy, the Avon Pension Fund will participate in real estate secondary opportunities, which are said to give the pension fund immediate exposure to the asset class, vintage year diversification and early distributions.
Partners Group said its investments in secondary assets have already distributed proceeds from two transactions only five months after the initial investment.
The asset manager recently exited an asset in China and officials at Partners Group said this is likely to generate more than four times the initial investment amount for its clients.
The firm had already invested on behalf of the Avon Pension Fund in the Nordic region. But the global real estate portfolio strategy also targets growth opportunities in emerging markets, where positive GDP growth, low levels of household debt and powerful demographic trends are likely to continue to be significant drivers of demand for real estate space.
The portfolio ramp-up for Avon Pension Fund's global real estate portfolio strategy also includes an allocation to Partners Group's distressed real estate strategies, which are designed to take advantage of the repriced US core real estate debt market by providing debt at attractive terms as quality assets with refinancing issues become available in the near future.
One recent direct investment was the purchase of a residential loan portfolio with a significant safety cushion built into the investment case - a purchase which Partners Group said it was able to make at 36% of face value, representing a discount of 40% to fair market value.
Partners Group plans to make further investments with the Avon Pension Fund, which is administered by Bath & North East Somerset Council (BANES).
"The Avon Pension Fund selected Partners Group to manage its overseas property portfolio on the basis of their ability to add value for the Fund through a clear focus on achieving the best risk adjusted returns," said Liz Feinstein, investment manager at BANES.
"In particular, the fund favoured Partners' global relative value approach using secondaries, directs and primaries to mitigate the j-curve effect, its long track record in global property, dedicated in-house legal and structuring expertise, and a strong global resource base."