UK - Local council pension schemes are set to invest more in property if limits on limited liability partnerships are increased.
Current investment rules only allow Local Government Pension Scheme funds to invest a total of 5% of their assets in limited liability partnerships with only 2% allocated to any single fund.
Proposed amendments – issued late last year – would allow LGPS funds to invest up to 15% of their assets in limited liability partnerships and up to 5% in any single fund.
Wolverhampton Metropolitan Authorities - the council that runs the £4.8bn West Midlands Metropolitan Authorities Pension Fund - has been advocating the change.
Coordinating director for financial and physical resources Brian Bailey said: “It wouldn’t take much for us to get involved in more venture capital or large joint property ventures and we’d be pushing the limit, too.”
Bailey added that the West Midlands fund had less pressure on the limit as much of its property was held directly.
He said many smaller LGPS funds were already pressing the limits and even the West Midlands fund could become strained.
Pressure on the LGPS limits has grown as limited liability partnerships have become more popular in property investment.
Morley Fund Management’s head of institutional property funds, Phil Ellis, agreed and said the move would give local government funds a way to increase their overall property exposure.
*A survey of delegates at the Aberdeen Property Investors’ conference showed that pension fund investment in property is set to rise to 10% of portfolios by 2005.
Much of it is likely to be in indirect property vehicles, such as limited liability partnerships.
API UK chief executive David Hunter said: “The availability of indirect property vehicles means that more, and smaller funds, can use property as part of their asset allocation, and the high level of take-up of such vehicles is no doubt a reflection of this.”
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