Local council pension funds from London and Lancashire are pooling £1.2bn (€1.44bn) of real estate.
The pension funds’ existing core property allocations are being combined through the Local Pensions Partnership (LPP), a jointly owned asset management vehicle.
Knight Frank Investment Management (KFIM) will source and manage investments for £850m of LPP capital.
The London Pension Fund Authority (LPFA) and Lancashire County Pensions Fund (LCPF) will respectively hold £300m and £550m in the pool.
The KFIM mandate will be combined with an existing allocation of £260m for specialist income and value-add strategies, including London student housing and residential developments, which includes a loan to affordable housing provider Heylo Housing.
For KFIM, the mandate almost doubles its assets under management to £1.75bn.
John Styles, the firm’s head of fund management, said KFIM will partner with developers and managers to access specialist sectors and value add opportunities for the fund.
As reported in March this year, the UK government has said pooling must be used for new allocations. Some schemes may choose to pool their existing direct property holdings. A survey by investment consultancy Hymans Robertson of 41 local government pension scheme funds found that just over half of property assets on aggregate were held through direct mandates.
The LPFA and LCPF have worked together since early last year, and LPFA has also launched a £500m infrastucture joint venture with the Greater Manchester Pension Fund (GMPF).
As the LPP is expected to fall below a £25bn asset target set by the UK government, the two funds are expected to collaborate with GMPF, West Yorkshire Pension Fund and Merseyside Pension Fund, who are all expected to invest in the infrastructure joint venture.
As reported by IPE, the Berkshire Pension Fund is also set to join the LPP.