London pension fund moves into private equity
UK – The London Pension Fund Authority is tendering a private equity mandate worth between 50 to 75 million pounds (70-105 million euros) after deciding to start investing in the asset class.
The LPFA’s move into private equity comes as a new report from the British Venture Capital Association has shown that UK pension funds halved their private equity investment in 2002.
Explained Amanda Walker, director of finance and investments at the authority: “Last year we decided as of an asset liability matching process to invest in private equity, and began to husband some cash ready to inject into the asset class for when the time was right.”
The portfolio will be part of one of the authority’s sub-funds, which in total is around 1.2 billion pounds.
The fund will be a stage and geographically diversified private equity programme, which may be established through pooled vehicles of as a segregated account or as a combination of the two approaches. Walker said that they are “not ruling out anywhere”, although a significant amount may be made in US equity.
One or more managers are being sought. The application deadline is June 19.
A report today from the BVCA showed that UK pension funds have cut their private equity investment. The BVCA said: “Funds raised by UK pension funds fell to 796 million pounds (1.1 billion euros) from 1.64 billion pounds in 2001, although they still represent 10% of total assets raised (12% in 2001).”
Total funds raised in 2002 fell 43% to 7.8 billion from 2001’s record of 13.6 billion. Funds of funds were an important source of equity, taking a 14% share with 1.0 billion pounds.