UK pension funds flock to liability-matching real-assets fund

Willis Towers Watson has created a liability-matching real-assets fund for UK pension schemes, which it hopes to grow to more than £2bn (€2.28bn) in size.

Karen Dolenec, global head of real assets, told IPE Real Estate that the Secure Income Fund had attracted £210m of UK defined-benefit pension capital and began investing it last week.

The fund can invest across real estate, infrastructure, renewable energy and debt markets and is expected to use a number of investment managers.

The multi-manager fund can invest across asset classes and use different investment methods, such as investing through funds, creating separate accounts, or engaging in co-investments and secondary trading of funds.

Dolenec said the fund was created because so many UK pension funds were looking to real assets as a liability-matching alternative to investment-grade credit and index-linked government bonds.

Willis Towers Watson has been pursuing similar strategies for UK pension schemes, often on an advisory basis, but the new fund is the first time the company has sought to structure the activities into a pooled fund.

The company has been targeting secure income assets that generate long-term yields of between 4% and 5% since 2006.

Dolenec said the new fund enabled the company to act more quickly for advisory clients – which require approval for individual investment decisions – as and when opportunities arise.

“Clients have been telling us about the challenges which they have faced in establishing a presence in the alternative area of secure income investments,” she said.

“If we don’t believe that the most appropriate solution exists, we will create it.”

Dolenec said Willis Towers Watson hopes to double the £210m raised in the short term. “We could see the fund getting to £2-3bn over the next few years,” she said.

When asked, Dolenec said the fund was not specifically aimed at the Local Government Pension Scheme (LGPS), which is being consolidated to create greater investment scale – but it is aimed at all UK defined-benefit pension funds.