The Pension Protection Fund (PPF) has been revealed as the third-party client behind M&G Real Estate’s £230m acquisition of an office building in Manchester let to RBS.

Last month, M&G announced it had acquired two RBS offices for more than £306m: 1 Spinningfields Square and 1 Hardman Boulevard in Manchester. The former was acquired on behalf of insurer Prudential, but CIO Barry Kenneth told IP Real Estate that the PPF had acquired the latter through a co-investment.

The PPF, a ‘lifeboat fund’ for defined benefit pension schemes in the UK, provided £230m and Prudential provided £100m.

Kenneth said the co-investment was made to enable the PPF to invest in large property assets where competition is less strong.

“There are not too many people that can bid for a £330m asset, but are a lot that can for a £50m asset,” he said.

“There [are] an awful lot of funds going for these assets at the moment.”

Kenneth added: “The easiest way to get the assets for what we want to pay for them is to extract ourselves away from the major competition. If we can co-invest with annuity companies then we will set up a couple of avenues where we can do that.”

The investment in Manchester comes under the PPF’s new ‘hybrid asset’ strategy, which is designed to enable the institutional investor to invest in a wider range of assets that might fall outside the traditional asset allocation silos.

Historically, the PPF allocated 70% of its assets towards cash and bonds to match liabilities, with 30% in risk assets aiming for a LIBOR-plus 1.8% outperformance target.

It has now established a 12.5% allocation to hybrid assets that provide liability matching and outperformance. Cash and bonds will now account for 58%, alternatives 22.5%, equities 7% and hybrid assets 12.5%.

Kenneth said the fund would not rush into other assets just to fulfill its new hybrid allocation strategy.

“A lot of these assets are long-term so we are prepared to wait,” he said. “There is no point us buying the assets now at a price we do not like, and one which will look silly in two years’ time.”