The London Borough of Hammersmith and Fulham (LBHF) Pension Fund is investing 5% of its £1.2bn (€1.4bn) portfolio in commercial ground rents, through a fund managed by Alpha Real Capital.
LBHF said as part of a restructuring of its inflation protection allocation, it is investing in Alpha’s Index Linked Income Fund (ILIF).
ILIF invests in portfolios of UK ground rent assets to provide a long-term secure and predictable inflation-linked income stream with associated capital growth. The fund seeks to invest in existing portfolios and assets as well as opportunities to create new ground leases.
Boris Mikhailov, the head of client solutions at Alpha Real Capital said: “Commercial ground rents provide pension schemes with very long-dated inflation-linked, investment-grade quality cashflows to help meet liabilities whilst also generating 4 to 5% p.a. more than comparable index-linked gilts.
“We see it as a natural asset class for Local Government Pension Schemes – they have a long-term investment perspective and can take advantage of private markets opportunities.”
Phil Triggs, tri-borough director of treasury and pensions (on behalf of LBHF Pension), said: “Alpha Real Capital is a market leader in commercial ground rents in the UK with a strong track record of delivering consistent inflation-linked returns and robust capital deployment. We look forward to working with Alpha.”
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