UK - A £1.5bn (€1.7bn) UK local authority fund has selected Hermes, Legal & General and Threadneedle as fund managers as it makes its first real estate investments.

The North Yorkshire Pension Fund, which tendered for as many as four property managers over the summer, said moving into the asset class was only the first step as it sought to diversify from a "fairly concentrated" portfolio of fixed income and equities.

As part of a review of its strategic asset allocation (SAA), North Yorkshire earlier this year agreed to allocate between 5% and 10% of assets to property - with the initial £75m investment split equally over the three fund managers and drawn from Standard Life's £385m UK equity mandate.

Hermes Fund Managers, Threadneedle Investments and Legal & General Investment Management were selected from among 22 managers and will each be given £25m to invest in core and core-plus property.

Speaking to IP Real Estate, Tom Morrison, pension fund accountant at North Yorkshire, said the fund was looking to spread risk and reduce overall volatility.

"The property funds are substantially UK-based," he said, explaining that choice was not restricted to funds solely investing in the UK due to a number of managers' relatively small overseas exposure.

Morrison added: "Each fund is diversified by geography and by sector, investing in a variety of properties such as office space in the City of London, out-of-town retail parks and industrial units.

"Although we have allocated only 5% to this asset class, we were looking for a broader exposure to property than would have been provided by a single appointment."

He said that while infrastructure had been considered at the most recent review, the committee had stood by a previous decision that the asset class was not an "appropriate" investment.

Morrison said it was too early to say if its allocation to property would grow at any point in future, but noted that the fund was currently at the bottom of its SAA target.

"Should we look to increase the allocation to property, how we do this will also depend on our assessment of opportunities overseas," he said.