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Strathclyde boosts New Opportunities portfolio with new mandates

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The Strathclyde Pension Fund is to add four mandates to its New Opportunities Portfolio (NOP) as it boosts its exposure to real assets and renewable energy.

The £14.4bn (€18.2bn) local authority scheme provides pensions for public workers and employers in western Scotland and the city of Glasgow.

Total commitments approved by the scheme’s board reached £68m and include ventures into social infrastructure, residential real estate, real estate credit and renewable power generation.

The NOP, a portfolio aimed at real assets and real estate mandates, accounted for 0.2% of the fund’s assets at the end of March this year, around £27m.

In August, the UK’s largest local government pension scheme (LGPS) said it was looking to increase its NOP allocations.

Alongside announcing a 2% investment return for the third quarter, the fund said it had approval to invest £15m with Alpha Real Capital, which would finance social infrastructure projects.

The fund manager is to finance the construction of ‘supported living’ for individuals with learning or physical difficulties.

Strathclyde said the investment should provide a net investment return of 8% over 20 years, with the eventual lease terms to be index-linked.

Revenues would come from other local authorities providing facilities for residents in need of care.

Also approved was an £11m credit facility to East Lothian Developments, a company looking to build residential properties in the east of Scotland.

The pension fund had been asked by East Lothian to provide a secured debt facility to manage costs dealing with planning permission and legal requirements for the construction.

Strathclyde said it expected a minimum 11% return over the course of the seven-year debt facility.

It also allocated a minimum of £10m to the Reneshaw Bay Real Estate Fund, which aims to provide real estate credit via a mixture of senior and junior loans in the UK, German, Irish and Dutch markets.

The return over the life of the fund is expected to be 10%, Strathclyde said, with a target coupon of 8%.

Taking total commitments to NOP to £68m, a $50m (€40m) commitment to the Terra Firma Infrastructure Fund for Global Renewable Energy was also approved.

The fund will invest in “substantial renewable power-generation assets and businesses”, according to Strathclyde, in both operational and construction-ready developments.

These will mainly be made in OECD countries, and the pension fund said it would expect a return of 15% over the life of the fund, with a running coupon providing one-third of this.

The NOP has an investment cap of 3% of assets, allowing the fund to increase its exposure to its eclectic range of assets via the newly hired managers.

Aside from its NOP, Strathclyde has also been diversifying away from equities – where almost three-quarters of assets are held – into infrastructure and real estate.

Earlier this year, it notched up its first local real estate project, purchasing the Gallagher shopping park.

It also bid to acquire Glasgow Airport at the start of the year, adding further to a £32m commitment to the Lloyds Bank UK Infrastructure Partners – also allocated from the NOP.

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