First Property Group awarded BAE pension fund mandate

BAE’s Shipbuilding Industries Pension Scheme (SIPS) has given First Property Group an initial £125m (€163.3m) to invest in UK real estate.

The commitment follows the fund’s investment in First Property’s UK Pension Property Portfolio (UKPPP) vehicle, which runs until 2017.

SIPS could increase its allocation to the new fund, which has an initial 10-year life.

A first investment for the fund could close in the next “few weeks”, said Ben Habib, chief executive at First Property, which re-entered the UK market in 2009.

No other investors will join the fund, making it essentially a separate account for SIPS, with First Property having full discretion over investments.

Unleveraged, the fund will invest across all property sectors, including residential – a potentially new sector for SIPS.

Investment in the UK’s growing private rented sector (PRS) will be inevitable, Habib added.

Advised by Hymans Robertson, SIPS was, he said, prepared to back an “opportunistic rather than formulaic, top-down approach to sector allocation in a low interest rate environment”.

“The broad mandate enables us to tailor our investment approach to prevailing market conditions and to deploy capital where it is likely to earn the highest returns,” Habib said. 

The fund, which will target a net total return of 7%, will invest in existing and development properties across the UK, with less emphasis on Scotland, where, Habib said, there is still potential uncertainty over how real estate is taxed.

The UK’s Universities Superannuation Scheme (USS) has backed First Property in Poland. 

The USS Fprop Opportunities fund, which invested in Poland, the Czech Republic, Slovakia and Romania, expires this year.

Five Polish funds raised between 2000 and 2005 had previously been backed by the pension fund.