The London Pension Fund Authority (LPFA) has seen investment returns of 6.1% over the year to April, backed by rising markets and infrastructure, according to its annual report.
The £4.9bn (€5.9bn) pension fund has long been an advocate for infrastructure investment, much through the influence of chairman Eddie Truell.
One of the fund’s infrastructure investment managers aided a 20% return on its £135m allocation to the asset class in March 2013, as it sold down one its portfolio of assets, making a healthy return on its investments.
The fund now holds more than £170m in infrastructure, accounting for 3.5% of total assets.
It had previously signed up as a founding member of the National Association of Pension Funds-backed Pensions Infrastructure Platform (PIP), before bowing out over cost and return concerns.
LPFA merged two investment funds, which had been used to separate active members and those deferred or retired. This led to a change in asset allocation and an increase in illiquid assets.
The fund holds £806m in illiquid assets, accounting for 16.5% of the portfolio, but its statement of investment principles said this should increase to 35% to benefit from the premium associated with these holdings.
The LPFA told IPE there was no formal timescale for this, or for bringing further assets in-house.
A shift to in-house would save on fees, the LPFA previously stated, with savings used to develop an asset-liability management system and invest in single private equity vehicles, avoiding funds of funds.
It said it made significant progress on developing the ALM project.
The LPFA added it would also look at opportunities as they came up and review the illiquid benchmark holding annually.
A spokesman said: “On illiquids, we have made material progress, but it is on an opportunistic basis.”
It follows soon after LPFA said it would be funding the development of new private-rented housing in the east of London.
On its plans to shift in-house, the LPFA added: “We are building in-house capacity and capability, we look to get the best returns, and that may mean direct or co-investment or investing via an outsourced model.”
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