UK - The London Borough of Brent has awarded a £25m (€28.2m) infrastructure mandate to Alinda Capital Partners as part of a diversification investment strategy.
Brent tendered the portfolio, valued at around 5% of the pension fund's assets, in January as it wanted to expand its exposure to "much broader" infrastructure investments following an initial move into the asset class as part of a fixed income portfolio run by Henderson. (See earlier IPE article: Brent to up infrastructure assets by 5%)
The tender search and appointment of Alinda Capital Partners was run by consulting firm Bfinance, with Jorge Huitron, senior associate at the firm, noting it had seen "increasing interest in this asset class, specifically in those funds that navigated the recent developments in the markets with low leverage and achieved yield targets".
Martin Spriggs, head of exchequer and investment for Brent pension fund, said following the appointment the current asset allocation target for the scheme is 8% property, 5% infrastructure, 8% private equity, 10% hedge funds, 1% cash, 4% GTAA, 18% Fixed interest, 46% equity.
The infrastructure mandate is being funded from terminating a currency mandate with Mellon at the end of 2008, and Spriggs said: "It is expected that we will initially invest about 1.5% with Alinda, rising to 5%. We have also increased exposure to hedge funds to 10% and to private equity to 8% over a set period."
A further move into infrastructure comes despite a disappointing 2008/09, where the pension fund returned -26% in the year to 31 March 2009, and the value of the scheme dropped to £345.2m from £470.7m in March 2008. Although recent stock market rallies mean the scheme is now valued at around £400m.
However, in the latest pension fund annual accounts, Councillor George Crane, chairman of the Brent pension fund sub-committee, noted that while the year had been "truly dreadful", the council was resolved to continue with its long-term approach.
Therefore he highlighted only minor changes would be made to the asset allocation of the fund, including a rise in exposure to hedge fund of funds, from 5% to 10% of the fund, and to allocate 5% to infrastructure.
Crane stated: "Research has indicated that infrastructure assets - roads, bridges, hospitals etc - can yield steady inflation linked returns over a long period."
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