On the go: The investment pool for London’s Local Government Pension Scheme partner funds has launched a new real assets fund aiming to steadily outstrip inflation, with seed money from the boroughs of Redbridge and Bexley.
The London Pension collective investment vehicle’s £107m Inflation Plus Fund launched on Thursday and will be managed by Aviva Investors.
The fund will primarily invest in long-dated real estate opportunities, such as long leases and ground rents, in a bid to deliver “consistent, stable, inflation-linked returns”.
Manager Aviva will also have the discretion to allocate to diversifying real assets such as infrastructure debt and real estate debt.
A reduced tolerance to equity volatility and compression of yields in fixed income have led many defined benefit schemes to tap private markets in search of reliable returns.
As an open scheme, the LGPS is significantly less derisked than its private sector peers, but has nonetheless seen its exposure to property and alternatives grow to 20 per cent of assets across the scheme.
Launching the new fund, Kevin Corrigan, interim chief investment officer at London CIV, said: “The demand for alternative income from our investors is likely to increase, particularly given the current environment, so this is an important addition to the London CIV suite of funds.”
Mark Versey, chief investment officer for real assets at Aviva Investors, added: “In this challenging investment environment, predictable, inflation-linked returns offer an attractive defensive quality to portfolios, making long income a natural destination for pension schemes as they look to reduce risk.
“Our hope is that other London Borough Pension Funds will follow Bexley and Redbridge into the fund and we anticipate it growing significantly over time. We look forward to helping this group of local authorities meet their investment objectives and cash flow requirements on behalf of their members.”
