Local authority pension pool invests £340m in long-lease property funds

Brunel Pension Partnership, one of the newly installed Local Government Pension Schemes (LGPS) ‘pools’ in the UK, is to invest £340m (€384m) in two long-lease property funds.

Brunel, which is designed to manage £30bn of assets of 10 local authority pension funds, said it is making two commitments of £169m to the M&G Secured Property Income Fund and the Aberdeen Standard Long Lease Property Fund, respectively.

The investment is being made on behalf of three of its LGPS funds, which include local authority schemes for Avon, Buckinghamshire, Cornwall, Devon, Dorset, the Environment Agency, Gloucestershire, Oxfordshire, Somerset, and Wiltshire.

The commitments represent the first two investments of Brunel’s secured income portfolio, which is one of five private-markets portfolios it has designed to meet LGPS investment objectives.

The secured income portfolio aims to deliver UK inflation-linked income returns, and long-lease property has been identified as its “cornerstone asset class”.

Brunel said it selected the M&G Secured Property Income Fund and the Aberdeen Standard Long Lease Property Fund after a “thorough search and evaluation process”.

Richard Fanshawe, head of private markets at Brunel, said the funds were chosen “for their individual merits and the strength of the overall combination”.

He added: “Together, they offer broad immediate diversification, strong long-term performance track records and sector-leading sustainability credentials.”

The size of the commitments will provide fee discounts and cost savings, Brunel said.

“We are very happy with the outcome of this process which clearly shows the benefits of LPGS Pooling in action,” Fanshawe said.

There are 89 LGPS funds in England and Wales, all of which are being consolidated into eight pools (Scottish LGPS are excluded).

The two commitments from Brunel will be reassuring for UK real estate investment managers, many of which have been seeking to understand what LGPS pooling will eventually mean for their third-party fund management businesses.

Long-lease property funds in the UK have been popular with UK pension funds, often for matching UK liabilities.

M&G’s fund is the largest in the sector, with £3.7bn in assets under management, while Aberdeen Standard’s fund has £2.21bn in assets, as at the end of June.