UK - The £8.5bn ($13.6bn) Aviva Staff Pension Scheme is looking to increase its allocations to real estate related assets to 15% over the next two years as it looks for long-term, liability matching assets.
Richard Field, director of global investment solutions at Aviva Investors, and a trustee on the pension fund said the scheme is looking for assets like property, mortgages, infrastructure or long-leases, for example, which will provide a steady income stream.
In an interview with Global Pensions, he said: "The idea is as the scheme matures, more and more of the fund will need to be invested in these types of assets anyway - (those with) long-term, stable, secure cash flows that support the benefits that have been promised to the scheme members."
The scheme invests 30% in growth assets and 70% in liability-matching assets.
But the amount invested in these real estate related assets is "much less than" 15%, said Field.
The move towards more liability-matching assets is part of a strategy presented to trustees by Aviva Investors - the REaLM (return enhancing and liability matching assets) strategy. The fund will likely increase its exposure to real estate related assets through Aviva Investors's REaLM funds.
"We are developing our REaLM strategy alongside Aviva Staff Pension Scheme and its adviser. ASPS announced last year the imminent closure to future accrual of its defined benefit section, making it a very mature scheme. Aviva Investors REaLM strategy fits well with the scheme's need for long term assets yielding a margin over gilts without introducing significant risks, and is reasonably well matched to its liability profile," said Field.
Aviva Investors, the asset management arm of insurance company Aviva, has been vocal about trying to attract external assets. And part of the way it will do this is by offering more holistic solutions, like the REaLM strategy, and other advisory and liability-type services.
"We think about the externalisation of products when we set them up...We have a particular strength in asset allocation and I think that will be an area pension schemes will find interesting," said Field.
The bulk of the firm's £260bn assets under management are run on behalf of its parent company, but officials declined to say exactly how much is run for external clients. But much of the external money has come into more targeted investments, like real estate funds.
"What we're looking to do is to develop different sorts of relationships with pension funds and other types of clients where we're working much more closely with them in the management of their liabilities. Pension funds themselves are inside the group and our starting point has been to work more closely with those funds," said Field.
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