EUROPE - UK pension schemes have committed £44m (€52.6m) to a £285m ground lease fund launched by Pramerica, the largest institutional fund manager invested in the sub-sector.
A spokesman for the fund manager said it had targeted low-risk investors, including those looking to diversify real estate exposure within existing allocations.
Paul Dennis-Jones, head of Pramerica's UK fund management business, told IP Real Estate he expected more pension schemes - both corporate and local authority - to invest in the fund as a means of matching long-term liabilities.
"With bond yields where they are, we're having busy conversations with pension schemes and their advisers," he said.
This week's announcement follows a mandate announced in November to manage £135m for a corporate pension scheme.
Dennis-Jones said the drivers for the investment were the same for both types of investor, but that larger pension were more likely to invest through separate accounts.
Although the scheme targets UK pension schemes, Pramerica is in preliminary discussions with an unnamed mainland European pension scheme looking to commit capital.
Dennis-Jones, who leads a team of former UBS ground-lease specialists, attributed the willingness of pension schemes to invest in the fund to the management team's record on capital deployment within the subsector.
Recent acquisitions for the fund include freehold leases linked to the retail prices index on six hotels across the UK for £90m.
The fund's strategy is to target assets with ground leases of more than 75 years.
Asked about the limited pool of potential assets, Dennis-Jones said: "We've been doing it for five years, and we have a big, attractive pipeline.
"The only way you're going to get capital is if investors can see the deal pipeline."