Strathclyde boosts local property venture with £25m commitment

Strathclyde Pension Fund is to boost its local property venture by £25m (€32m), ahead of fund manager Ediston Real Estate exhausting the scheme’s initial commitment.

The £15.6bn local authority fund, responsible for the retirement benefits of workers in Glasgow and the surrounding region, said it would boost its commitment to the Clydebuilt Fund to £75m, part of an efforts to grow its exposure to enhanced-yield strategies.

The vehicle, set up in 2013 with an initial £50m investment by Strathclyde, targets properties worth no more than £10m in Glasgow and the surrounding region.

As part of the additional allocation, Ediston will commit a further £1m of its own capital, in line with the £1m it allocated when the fund was first set up.

A report prepared for Strathclyde’s pension committee noted that, without additional funding, the Ediston vehicle would run out of capital by the end of 2016.

However, the same report added that the additional funding would only be sufficient to meet the existing pipeline of investments for another 12 months, remaining focused on property within the target region of the West of Scotland.

The additional allocation to Clydebuilt will boost Strathclyde’s long-term enhanced yield (LTEY) portfolio to 14.8% of scheme assets, part of an overhaul of its asset allocation initiated last year.

A £50m commitment to the first in-house fund managed by the Pensions Infrastructure Platform (PiP), of which Strathclyde is a founding investor, will allow it to reach its strategic LTEY target of 15%.

The £50m allocation to the PiP Multi-Strategy Infrastructure Fund is in line with the local authority scheme’s initial £100m commitment to the PiP.  

However, because the £100m formed part of Strathclyde’s Direct Investment Portfolio, which has grown to 5% of total fund assets since the initial soft commitment in 2012, the fund said it decided to boost its total PiP commitment to £120m.

The PiP has previously launched two externally managed funds – a PPP Equity vehicle managed by Dalmore Capital and a Solar fund managed by Aviva Investors.

The in-house PiP fund was launched after the venture received approval from the Financial Conduct Authority in January, a step PiP chief executive Mike Weston previously hoped would have been completed by the end of last year.