BlackRock has launched an alternative income fund to provide schemes with access to investments such as infrastructure debt, renewable energy and direct lending.
The investment management firm's Strategic Alternative Income Fund (SAIF) aims to deliver long-term, stable cash flows and targets a net annual yield of 5% over the investment horizon.
The cash flows produced by the fund have both explicit and implicit linkage to inflation and are sourced from investments across infrastructure debt, renewable energy, real estate debt, long lease property and direct lending in the UK.
BlackRock said the fund will access these markets through a mixture of funds, bespoke mandates and direct transactions.
The launch of the fund comes as schemes are increasingly looking towards alternative income due to the low yields on offer from traditional asset classes - indeed a survey, conducted in December last year among BlackRock's largest institutional clients, found that 53% of respondents intended to increase their allocation to real assets and 47% intended to increase their allocation to real estate this year.
BlackRock UK head of intermediated clients Andrew Stephens (pictured left) explained: "UK pension schemes are increasingly embracing less liquid strategies to enhance returns, but these types of investments are not often easy to exploit.
"By creating a single portfolio that provides exposure to a range of alternative income sources we are helping schemes access these markets more easily while also providing diversification."
Stephens added: "The strong asset returns we've seen since 2009 haven't fed through to improved funding levels for defined benefit pension schemes and forward looking returns from public markets alone won't meet their objectives.
"With many schemes' recovery plans being in excess of 10 years, the illiquidity premia that schemes can source from private markets are compelling and UK pension schemes, with their long investment horizons, are ideally positioned to benefit."
The fund structure is semi-open ended and investors are provided with windows of liquidity every year following an initial 4-year lock-in.
BlackRock said there are guidelines to allocations across the underlying asset classes within the portfolio and the managers will observe "prudent levels of diversification" - but noted allocation guidelines are flexible, allowing the managers to take advantage of opportunities to deploy capital as they present themselves.