IRELAND - Ireland’s €2bn Electricity Supply Board (ESB) pension fund has re-routed its €70m directly managed, seven-asset real estate portfolio into the Irish Property Unit Trust (IPUT).
The move will make ESB one of the largest shareholders in the €450m fund, which last year returned just under 9% and anticipates a similar return this year.
The other shareholders include state agencies, Irish universities and the pension funds of Irish Airlines, Diageo and Eircom.
The transferred portfolio comprises prime office and retail in the capital, returning €8m in annual rent and an annual average return of 11%.
More than 50% of the IPUT’s existing 56-asset portfolio is invested in prime office in Dublin’s central business district (CBD).
ESB group pensions manager Marie Collins declined to speak to the press about the transaction - the largest institutional deal in Ireland since 2007.
But she said in a statement released by IPUT that it would provide the scheme with “greater exposure to a more diversified portfolio of Irish properties without changing [its] overall allocation to Irish property”.
The delegated assets represent ESB’s entire direct portfolio, although it also invests via funds in mainland European real estate.
Due diligence on the deal took most of the second half of last year to complete.
But IPUT chief executive Niall Gaffney said the timing of the announcement was significant because Irish pension schemes were under pressure from the Pensions Board to drive for maximum returns and greater efficiencies.
Gaffney told IP Real Estate he expected three or four similar-sized schemes with directly held assets to consider following ESB’s example.
“It’s a sign other pension funds of a similar size will be looking to do the same thing,” he said.
“Trustees tend not to manage bonds and equities themselves, but to hire external managers to do it for them. There’s no reason why it should be any different for real estate.
“These tend to be pension funds of long duration. Property will have been part of the portfolio for a long time and will require active management. Trustees aren’t necessarily proficient in providing it.”