11th October 2019
Langham Hall is delighted to have been appointed to provide administration services to Local Pensions Partnership Investments (“LPPI”) first pooled LGPS Real Estate Fund.
LPPI has set up the Fund to pool the assets of three public sector pension schemes that it manages, launching with over £800 million of direct UK property investment assets, and a further £460 million of property assets due to transition in to the fund over the coming months. The Fund is expected to reach c.£2 billion of assets under management.
Formed in 2016, LPPI currently manages more than £17 billion of pension assets, on behalf of the Lancashire County Pension Fund (“LCPF”), the London Pensions Fund Authority (“LPFA”) and the Royal County of Berkshire Pension Fund (“RCBPF”). The LPPI Real Estate Fund is a sub-fund of an Authorised Contractual Scheme (ACS) managed by LPPI. The ACS is a UK-domiciled fund structure, in which its sub-funds are treated as tax transparent for income and Capital Gains Tax purposes. This fund type was designed for institutional investors looking to simplify their investment structures and to enhance returns.
Real Estate returns increasingly attractive
The launch of this latest Real Estate Fund is representative of an increasing trend towards alternative investments by institutional investors, with around 90% of investors planning to at least maintain or increase their real estate allocations over the next 12 months (source: Preqin). This new fund has been specifically setup to allow LPPI’s clients to meet their agreed allocations to Real Estate.
LGPS Funds trend towards direct investments
This latest fund by LPPI is part of a trend by some institutional investors to favour a direct investment approach. A study by Hymans Robertson of 41 LGPS funds found that just over half of property assets on aggregate were held through direct mandates – a result of some LP’s trying to reduce their costs. Furthermore, a report produced by Hymans Robertson detailed the “removal of multi-manager” allocations as a key move to achieve an expected 28bps cost saving for LGPS funds, alongside “migration from indirect to direct” and “pooling direct mandates.”
Indirect property still has a key place in a portfolio
Despite the increased trend towards direct investment, specialist fund managers still have a significant part to play in investor allocations. Certain sectors will favour indirect investment, particularly where an LGPS does not have the relevant expertise, as well as investment overseas (only 6% of LGPS holdings are outside of Europe), but Core UK managers may find themselves coming under pressure from investors in the coming years.
Langham Hall is an award winning provider of fund administration and AIFMD services to Alternative Asset managers globally. For more information on our services, please do get in touch.