UK - Private equity is gaining ground with local authorities although some schemes are being held back by the need for more immediate returns.
City of Edinburgh Lothian Pension Fund and the London Borough of Brent have both recently made initial 5% allocations to private equity.
Geik Draver, head of investment and treasury, said: “We were looking to diversify our portfolio and private equity will provide us with returns and rewards. We will have a global exposure for the new asset class.”
The move follows an asset liability management study carried out by Hymans Robertson.
Draver added that the decision has been approved by the trustees and Lothian would now decide on how to implement the change to its asset allocation. Previously, the £1.7bn fund had an 80% equities exposure and held 20% over bonds, property and cash. Private equity is expected to be sourced from equity assets.
The fund has also reappointed Lloyd George Asset Management for its £55m specialist emerging market equity portfolio following a formal tender procedure.
Separately, the £300m London Borough of Brent Superannuation Fund has appointed Westport Private Investors to a £15m fund of funds strategy.
Westport will target the UK, Europe and US markets in a move advised by Hewitt Bacon & Woodrow.
However, some regional funds remain critical of the short-term virtues of private equity allocation.
Lincolnshire County Council has decided against increasing its allocation to private equity to 5%, retaining its current 3% level.
David Forbes, assistant county treasurer said: “It never went though our trustees who decided that the allocation towards private equity would not yield any short-term results and such a move would not add any immediate value to our current portfolio.”
The local authority raised its asset allocation from 2.5% to 3% last year on recommendations from Hymans Robertson.
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