Lothbury Investment Management is winding down its long-running UK open-ended property fund, citing “shifting investment needs” among definited benefit (DB) corporate pension schemes.

The UK real estate investment manager said that, following a “significant rise in interest rates over 2022 and 2023”, many of the Lothbury Property Trust’s (LPT) investors have “achieved fully funded status, substantially reducing their requirement for property as part of their investment portfolios”.

Corporate DB pension schemes have traditionally invested in UK open-ended property funds, but high interest rates have accelerated the trend within the sector to de-risk portfolios and opt for risk-transfer transactions with insurance companies.

Lothbury added: “This development reflects a broader trend within the industry, with other investment managers also impacted by improved funding ratios for pension schemes.”

LPT which invests in all the main commercial property sectors, had a net asset value of £848m (€1bn) as of 30 April this year. 

Lothbury has implemented what it terms a “core/active” investment strategy for the fund since inception in February 2000, with 80-90% of the portfolio made up by core, income-producing properties and the remainder core-plus investments that can include refurbishments, reconfigurations and developments.

Clarendon Shopping Centre

Source: Lothbury Investment Management

Clarendon Shopping Centre

The fund’s assets include the Clarendon Shopping Centre, the Sheraton Park student housing in Durham, the Meteor Park industrial asset in Birmingham, the Priory Park industrial asset at Mills Road in Aylesford and the Malmaison boutique hotel in York.

Adam Smith, CEO of Lothbury Investment Management, said the decision to terminate the fund was not taken lightly and only after due consideration of several other options. 

Smith added: “However, on balance, it was believed that it presents the most equitable solution for all of our investors and allows us to distribute the proceeds in an orderly and efficient manner. 

“We remain committed to our investors and will continue to manage the wind down process with the utmost care in order to get best price whilst providing full transparency.

“We are incredibly proud of the fund’s performance over the last 24 years, outperforming the benchmark in 70% of the years prior to the pandemic. This track record is a testament to our dedicated team and our disciplined investment strategy.”

Lothbury said it will, in the meantime, continue to “expand its work on a growing number of mandates from Nomura Real Estate and other clients”.

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