Worcestershire County Council Pension Fund is investing in the AEW UK Real Return Fund as it seeks to tilt its portfolio towards real assets.
The UK local authority pension scheme is committing £20m (€22.7m), increasing the size of AEW’s fund by 30% to £86m.
AEW UK, an affiliate of global real estate fund manager AEW, has pitched its Real Return Fund as an “alternative to the popular long-lease funds”, which have been attracting capital from UK pension funds looking to match liabilities or find alternative sources of fixed income.
AEW UK said its fund will “align the real benefits of property with the liabilities of pension savers and long-term investors” by focusing on “assets in the less cyclical areas of the economy and in more demographically-driven sectors such as assisted living and care homes”.
The fund has deployed around half of the additional capital with the acquisition of two residential care homes let to Prime Life.
It is targeting a total return of 4% and has delivered a nominal total return of 9.9% for the 12-month period to the end of September.
Mark Forrester, finance manager at Worcestershire County Council, said: “We have been impressed with the AEW team’s track record and performance-driven strategy in deciding where to make our allocation.
“We have been looking to reposition the Worcestershire County Council Pension Fund into real assets and the AEW UK Real Return Fund seemed a natural fit for our investment approach.”
Ian Mason, portfolio manager at AEW UK Real Return Fund, said: “We are delighted to have received this endorsement from Worcestershire County Council, which demonstrates the appeal of our innovative real estate strategy.
“We have already put much of this additional capital to work and see a positive pipeline in a diverse range of property sectors including care homes, leisure and car showrooms, as well as the traditional sectors.”