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IPE special report May 2018

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Berkshire Pension Fund to buy 20% of Gresham House for alternatives push

The Royal County of Berkshire Pension Fund is to take a 20% stake in specialist asset manager Gresham House, backing a new alternative investment platform for other local government pension schemes.

The Berkshire fund will provide the cornerstone investment for a new £300m (€353m) fund Gresham House plans to launch on the platform, called the British Strategic Investment Fund (BSIF).

The BSIF is targeting investment in housing, infrastructure and “innovation” – three themes identified by the UK’s chancellor Philip Hammond in his 2016 Autumn Statement as being of strategic importance to the UK, said Gresham House.

John Lenton, chairman of Berkshire Pension Fund, said the platform would enable the pension fund “to reduce costs and obtain diversity in our investments”.

He added that the pension fund will target niche areas and smaller and longer-term investments than those that interest “the major investment houses”.

“These give us the potential of a higher long-term return which is so important to a pension fund like ours that has to plan for pensions that will be drawn down many years in the future,” Lenton said.

The new investment platform is intended to provide investors with access to illiquid alternative investments in niche asset classes that are often “overlooked” and difficult to access by larger funds, according to Gresham House.

“For example, it becomes uneconomical for £25 billion pension ‘super-pools’ to monitor and manage sub-£50 million investments,” said the asset manager.

The platform is aimed at local government pension schemes (LGPS) like Berkshire, but is also open to private sector pension funds, endowments, family offices, and other investors.

“Initial discussions with a limited number of LGPS have confirmed interest in the objectives of the new Gresham House platform,” said the asset manager.

UK LGPS are pooling assets to create larger funds capable of benefitting from economies of scale and, as desired by the government, investing in infrastructure.

The Gresham platform is intended to allow investors to be involved in the investment process or engage directly with the manager, and to grant discretionary co-investment rights to “top-up” investments in preferred sectors or areas on a deal-by-deal basis.

Berkshire’s acquisition of the 20% stake in Gresham House is subject to a vote at a general meeting on 10 March.

Its move to enter into a strategic relationship with Gresham comes after the pension fund late last year announced a £15m investment in commercialisation of UK university research as part of an overhaul of its private equity portfolio.

Tony Dalwood, CEO of Gresham House, said that the announcement “represents a further significant step in delivering the growth strategy that we set out when repositioning the group two years ago”.

The asset manager’s board has identified alternative asset management as “a structural growth area”, it said in a statement.

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